TWO NEW STOCK PICKERS JOIN ALLIANCE TRUST
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QUARTERLY NEWSLETTER • SPRING 2021
TWO NEW STOCK
PICKERS JOIN
ALLIANCE TRUST
By Alliance Trust
Two new Stock Pickers have been They ignore short-term share price ALLIANCE TRUST:
added to the portfolio to increase volatility, seeking instead returns through DIVERSIFIED,
sources of potential return and cash dividends and long-term market HIGH-CONVICTION
recognition of the fundamental value of
balance risk. Both are employee- Research shows that active equity
their investments. They look for companies
owned private businesses and managers add most value through
with skilled management teams that
are highly differentiated in their a small number of their highest-
understand their business and are making
approaches to investing from the conviction positions1. Yet, the
decisions which are in the best long-term
performance of concentrated
existing eight Stock Pickers. interests of the shareholders. Often they
portfolios can also be highly volatile.
look for companies where management
Metropolis Capital is a UK-based boutique The Alliance Trust portfolio mitigates
has a significant stake in the business,
investment management firm with $1.4bn this risk by blending together the
particularly owner-occupied firms, where
of client assets under management. best ideas of ten best-in-class2
a founder still has a leadership role.
It specialises in unconstrained, high- Stock Pickers, each with different,
conviction, global equity investment, and With $68bn in client assets, Sands Capital
complementary styles. We believe
is, therefore, a natural fit for the strategy. is a much larger firm but still independent,
our diversified, high-conviction,
based in the Washington DC area of the
With 40 years experience between global equity strategy should deliver
United States. It specialises in investing
them of building, running and selling more consistent outperformance
in concentrated portfolios of high-quality
successful businesses, founders and lower volatility than a strategy
businesses from around the world who
Simon Denison-Smith and Jonathan Mills, run by a single manager. Returns
are truly innovative and can sustain
both former management consultants, from single-manager strategies are
above-average growth over the long term.
are value investors with a private equity often prone to sharp up and down
approach to public markets. moves; we aim to provide investors
with a smoother ride.
1. Sebastian & Attaluri, Conviction in Equity Investing, The Journal of Portfolio Management, Summer 2014. 2. As rated by Willis Towers Watson.
S I M O N D E N I S O N -S M I T H A N D MICHAEL SR AMEK ,
J O N AT H A N M I L L S , C O - FO U N D E R S S E N I O R P O R T FO L I O M A N AG E R
A N D C O - P O R T FO L I O M A N AG E R S , & M A N AG I N G D I R EC T O R ,
M E T R O P O L I S C A P I TA L L I M I T E D S A N D S C A P I TA L M A N AG E M E N T
The lead manager on the Alliance Trust “The addition of the new managers will
Like the other eight Stock Pickers,
mandate will be Michael Sramek who has not alter the overall concept that the Metropolis and Sands will manage
been with the firm since 2001. portfolio should have no meaningful style, customised mandates of 10-20 stocks for
country or sector biases relative to the Alliance Trust which can only be accessed
There are six key criteria which have
market,” said Baker. “Indeed, having two through the Company.
to be satisfied before Sands invests
more skilled Stock Pickers in our line-
in a company: Although the number of holdings in
up should provide greater diversity and
the portfolio will increase, the overlap
1 sustainable, above-average flexibility whist our portfolio construction
between the Stock Pickers is likely to
earnings growth; will ensure that performance is driven by
remain low. “We anticipate that there may
2 leadership position in a promising stock selection.”
be some overlapping holdings, particular
business area;
Despite the headwinds against the value among the larger companies in the index,
3 significant competitive advantage/
style of investing for most of the last few but Metropolis and Sands both bring
unique business franchise;
years, Metropolis’ flagship strategy has something different to the portfolio and
4 clear mission and value-added focus;
delivered very strong outperformance will naturally tend to invest in companies
5 financial strength; and
since its launch in June 2008, returning not currently held,” said Baker.
6 rational valuation relative to the
14.8% gross of fees per annum in GBP
market and business prospects. The capital allocated to the two new
terms vs 10.2% for the MSCI ACWI Index.
managers to manage will be redistributed
Sands’ focus is on the sustainability of It has done particularly well over the last
from the other eight.
a business’ future earnings growth, 12 months, outperforming MSCI ACWI
which leads it to invest in companies by 13.6% gross of fees for the 12 months
that are benefiting from structural through to the end of March 2021.3
change and secular trends—distinct from
Find out more
Sands has had very strong returns,
cyclical economic factors—in selective
outperforming MSCI ACWI in every
industries and businesses with powerful Past performance is a not a reliable guide
calendar year in the last decade except for
growth tailwinds. to future returns. Please note the value of
2016. The Sands Global Growth Fund was investments and any income from them
Craig Baker, Chairman of the Alliance Trust up 20% relative to its benchmark for the can go down as well as up.
Investment Committee and Global Chief 12 months to March 2021 end. The strategy
Investment Office of Willis Towers Watson, outperformed the index by 10% per annum
says Metropolis and Sands should provide gross of fees in USD terms for 3 years,
new sources of potential return for the 5 years and since its inception in January
portfolio, and increase flexibility when 2009 to end of March 2021.
allocating capital between the Company’s
Stock Pickers.
3. Source: eVestment
INVESTMENT
PATHWAYS
AND THE
ALTERNATIVES
By Faith Glasgow
When the pension system was insurance companies and other providers and Hargreaves Lansdown, and from other
overhauled with the introduction responsible for many workplace pension pension providers such as PensionBee.
in April 2015 of pension freedoms schemes and private pensions such
It’s a simple process. Having chosen
as SIPPs.
that allowed people to make their a provider (about which more later)
own decisions about funding Other employers use a different pension and decided which of the four broad
their retirement, the authorities set-up known as a Master Trust, which retirement objectives is closest to their
knew they were taking a big step are separately overseen by the Pensions own plan, pension holders are offered
into the unknown. Regulator, but it’s widely expected that it a ready-made low-cost investment
will introduce a similar initiative to help appropriate to that scenario.
With hindsight, however, worries around scheme members at retirement.
As Paul Herbert, senior director at Willis
pension funds being splurged on fast cars Towers Watson, observes: “People
and world cruises proved unfounded. T HE PAT H WAYS E X PL A IN ED
may well not feel very confident about
Instead, arguably the most concerning IPs are designed to simplify the decisions investing, but they are much more likely
trend has been one of ‘excessive caution’ pension investors face at retirement, to know roughly how they intend to use
– a tendency for people to move their once they have taken the 25% tax-free the money. This way, they make that
pension fund into cash and keep it there. lump sum from their pension pot. They’re choice and then the investment decisions
available from insurers such as Aviva and are delegated to the provider.”
That may reflect a fear of losing money
Standard Life, but also from investment
in the stock market, or the fact that they
platforms including interactive investor
simply don’t know what else to do with
it. Either way, the very real danger is that
over time the real value of their money
will gradually be eroded by inflation.
The Financial Conduct Authority’s
Investment Pathway (IP) scheme that
came into force at the start of February
is designed to target the risk of retirees
reverting to cash for their pension fund,
and to make it simple for less engaged
or knowledgeable investors to find an
appropriate investment choice in line
with their personal game plan.
It’s worth pointing out that so far, IPs
have not been rolled out right across
the UK pension arena, but only by those
providers regulated by the FCA – the
O P T I O N # 1 I H AV E N O O P T I O N # 2 I PL A N TO O P T I O N # 3 I PL A N TO
PL A N S TO TO U C H M Y S E T U P A G UA R A N T EED S TA R T TA K IN G A LO N G -
M O NE Y IN T HE NE X T IN C O M E ( A N A NN U I T Y ) T ER M IN C O M E W I T HIN
F I V E Y E A RS W I T HIN F I V E Y E A RS F I V E Y E A RS
People who make this selection may have Those intending to buy an annuity This pathway is about income drawdown;
other pensions or income sources that with their pension in the coming years it’s designed for the growing number of
mean they don’t need to use this pot need to ensure their earmarked capital people who want to leave their pension
to generate an income for the foreseeable keeps pace with any fluctuations in invested but intend to start making
future; perhaps they plan to gift it to annuity rates. regular or occasional withdrawals in the
a child, or want to hold it to pay for next five years.
The money used to buy annuities is
long-term care down the line.
invested in long-dated government and “The risk here is that too cautious an
Either way, they can afford to leave the corporate bonds, and annuity rates move investment strategy will not produce
money invested at least partially in the in line with bond yields. So it makes enough of a return to last for the next
equity markets. Even if it loses money sense for prospective annuity purchasers 30 years or more, so it needs to include
in the short term, with a timescale of to have their pension pot in a fund of some equities,” explained Herbert.
five years plus they can expect to see bond holdings of a comparable duration
For instance, unlike its peers, interactive
some growth. that will be similarly affected by changes
investor’s choice uses a ‘lifestyling’ fund
in interest rates.
Be aware, however, that there is - which decreases the proportion of
considerable variation in the offerings A mixed or balanced fund is therefore equities over time – to reduce the risk of
available from different IP providers, so the favoured choice for most IPs, though stock market losses in those early years
it’s important to understand the nature again there are significant differences of drawdown, as this can do irreparable
of the fund you invest in. between providers’ choices. damage to the value of the fund.
Aviva, for example, uses a balanced On the whole there is much less variation
fund with a broad mix of asset classes; between the offerings of different IP
Hargreaves Lansdown focuses primarily providers for this option.
on bonds to reduce risk, while Pension
Annuities have fallen out of favour with
Bee aims for growth through an equity-
younger retirees, but the security they
dominated fund.
provide makes them an increasingly
attractive choice as people get older.
In that respect, it’s perfectly feasible
to revisit your IP choice at a later date,
if you think you’re likely to want to buy
an annuity in years to come.
For option 1 – remaining fully invested
O P T I O N # 4 I PL A N TO – many investors may simply leave their
TA K E A L L M Y M O NE Y current portfolio in place. However, if you
O U T W I T HIN F I V E wanted to simplify it or reduce costs, you
Y E A RS could use a well-diversified trust such
as Alliance Trust as a robust long-term
core. As a cheap passive alternative,
For those who want to cash in their Henry Cobbe, head of research at Elston
pension pot altogether in the next few Consulting, suggests the use of multi-
years, option 4 is the best choice: the asset passive funds.
focus needs to be on protecting the value
Those looking at option 2 and annuity
of the pension, rather than sustainability
purchase in the medium term really need
or growth.
to stick with bonds funds that will
That rules out stock market investments, preserve annuity purchasing power. Cobbe
which are too volatile for such a short suggests gilt or sterling corporate bond
timescale. Instead, the IP emphasis is on trackers, or the Fidelity Pre-Retirement
bonds, money market and cash holdings, Bond fund.
aiming if possible to preserve the real
What about option 3, for those about
value of the investment. But there is
to start taking an income from their
a risk that pensions invested in these
investment? “This is the hardest one,”
choices will become worth less over time,
says Cobbe. If they want to live off the
as charges and inflation outpace returns.
natural yield generated by the portfolio,
he favours a multi-asset income fund.
T HE PR AC T I C A L I T IE S
In practical terms, investors who want to Herbert, meanwhile, suggests that,
take advantage of the IP scheme could
“A diversified equity fund
just make use of the solutions being
offered by their pension provider; but they such as Alliance Trust
are encouraged to shop around in the could be used for the
open market in order to find the choice equity element of the
that will suit them best.
portfolio, alongside a mix
The IP selection tool provided by the of lower-risk, income-
government’s Money Advice Service
(https://www.moneyadviceservice.org.
producing assets such as
uk/en/tools/drawdown-investment- bond and property funds.”
pathways/get-started) is a good place
to start a search. It includes details of Finally, for option 4, Cobbe makes the
the fund being used for each pathway case for a passive money market fund or
by some of the main providers, and also ultrashort bond ETF.
allows comparison of the cost of that For investors who don’t have a financial
pathway in the first year, which can also adviser but lack the confidence or
vary considerably between providers. inclination to make their own choices at
One crucial question around the retirement, Investment Pathways provide
Investment Pathways initiative is whether a potentially valuable solution that will
investors will actually make use of them. help them avoid the key investment risks
Herbert believes they will be use. “Some associated with each game plan. But
people don’t engage with their pension self-directed investors too can learn
investments at all, but we see many useful lessons from a closer look under
others as ‘guided selectors’ who need the IP bonnet.
some help to achieve the right outcome. Faith Glasgow is a freelance writer and
We think they will connect with IPs,” former Editor of Money Observer.
he says.
This information is for informational
Of course, there is another band of purposes only and should not be
considered investment advice.
investors who may find the Investment
Pathways useful as pointers, but who
would rather identify their own fund (or
use a financial adviser to do it for them)
for the objective they have in mind.
So what kind of fund might self-guided
investors look at in each case, bearing in
mind the need to manage particular risks
Explore more investment
and also to keep a lid on costs?
expertise
ETFS VERSUS ITS
By Jennifer Hill
ETFs are shiny, new and booming account for 39% of clients’ overall On the face of it, active
and various fund providers are ETF holdings by 2023, up from 20%
three years ago and 31% at present,
ETFs ought to be viable
hailing active ETFs as the next
according to a survey by JPMorgan competitors to investment
big thing. But it could be argued
that active ETFs have been
Asset Management. trusts. However, active
around since the 1880s in the James Sullivan, head of partnerships ETFs have so far failed
form of investment trusts. We at Tyndall Investment Management, to ignite the interest of
spoke to ten experts to compare said: “The ETF market has witnessed UK investors.
the two vehicles. phenomenal growth in recent years,
catalysed by a changing regulatory Vanguard launched its first active ETFs on
Exchange-traded funds or ETFs – listed landscape and a broadening of the the London Stock Exchange in December
funds that give quick access to a range of ETF market. 2015 but closed them in February 2021
indices and assets – are big business in “Historically, one would be forgiven for due to insufficient demand.
the US where they command more than suggesting ETFs are passive in nature, Managed by Vanguard’s quantitative
23% of assets. Uptake is comparatively constructed to track an index, but there’s equity group, the four Ireland-domiciled
low in Europe, where they account for been a purposeful shift towards active ETFs were designed to provide broad,
less than 10% of assets, Morningstar data ETFs by product providers. This has globally diversified equity exposure each
compiled for Alliance Trust shows. created a new benchmark for traditional with a tilt to an investment factor – value,
mutual funds and investment trusts.” momentum, low volatility and liquidity.
It is a market that is attracting growing
At the time of their launch, Vanguard
interest due to its development from James Carthew, head of investment said the products were “a compelling
traditional passive ETFs that simply track company research at QuotedData, draws alternative to high-cost active strategies
an index, sector or commodity to ‘smart several parallels between active ETFs and that target similar exposures”.
beta’ ETFs that use a blend of passive and investment trusts that have zero discount
active strategies by following bespoke control mechanisms (whereby boards buy Ben Yearsley, a director at Shore Financial
indices based on particular fundamentals back shares to narrow a discount or issue Planning, believes there is “no reason
and now ‘active’ ETFs. They have a them to reduce a premium). why active ETFs shouldn’t or couldn’t
manager or team making investment take off here”. Part of the problem is
decisions and the flexibility to trade “Both are listed. Both expand and structural – “the UK market is centred
outside their normal rebalancing periods. contract in response to investor demand. around mutual funds and platforms have
Both have a depositary. Both need a largely developed with those in mind” –
Active ETFs account for just 0.72% of fund manager or managers. Both need and part comes down to the idea that the
total US assets and 0.13% of European accounts and must report to investors,” ETF market is “passive only, with the
ones, the Morningstar data shows, but he said. “The more you go into the detail, odd exception”.
global fund selectors expect them to rise the more it seems that we’re reinventing
strongly in popularity. Asset allocators the wheel.”
reckon active and smart beta ETFs will
COST some of these “active” ETFs is minimal, Kepler Partners points to a string of
and the active ETF industry is just a way research papers that support the case
There is also a perception that ETFs
of expanding profit margins over passive for a more concentrated – but still
should be ultra-cheap. “Anything that
ETFs,” he said. highly diversified – approach.
isn’t sub, say, 0.3% is seen as expensive,”
said Yearsley. “This seems plausible – not only do “The overwhelming evidence is that
they seem a bit gimmicky, but why fund managers who are willing to back
ETFs that track the FTSE 100 can be
should investment managers focus their their convictions with punchy bets are
bought for an annual cost of 0.07% but
attention on accounts that are less the ones who tend to outperform by the
others cost considerably more. Vanguard’s
profitable to them?” highest margin,” said investment trust
European active ETFs carried ongoing
analyst William Sobczak.
charges of 0.22%.
PER FO R M A N C E
Darius McDermott, managing director
While cost is important, performance is
“Investors” he said,
of Chelsea Financial Services, gives the
arguably more so. “Investors have been “should think about the
example of Fidelity Global Quality Income
duped into believing that investing is all benefit that the more
ETF, a smart beta ETF that tracks the
Fidelity Global Quality Income index,
about cost,” said Roddy Kohn, managing focused approach of many
director of KohnCougar. “This shouldn’t
which has been designed to reflect
surprise anyone because the passive
investment trusts brings
medium and large developed market
fund industry is a behemoth and exceeds to their portfolio.”
companies that pay dividends and have
the money invested in active funds. Its
quality characteristics. It levies ongoing A 2013 paper by finance professor turned
impact on investors’ psyche is becoming
charges of 0.4%, whereas investors can fund manager Antti Petajisto asserted
more pronounced.
buy an actively managed income fund that the most active Stock Pickers
for 0.25%. “I tell my clients, ‘Don’t let the charges outperformed their benchmarks by 1.26%
tail wag the investment dog.’ After a year after fees. In 2015, academic
The argument, for Carthew, comes down
40 years in business I’m still having Martijn Cremers looked at high active
to value for money. “Is the management
to remind new clients of this tried share portfolios (those that differ the
company creaming off a fatter profit
and tested mantra. most from their benchmarks) relative to
margin from one than the other?
“Our client portfolios are littered with the investment timeframe and found that
Accusations have been made against the
investment trusts that have easily managers who held stocks for more than
ETF industry in the US that the degree of
outperformed many ETFs,” he said. two years outperformed by more than
active management involved in running
2% per year.
Past performance is not a reliable indicator of future returns.
“These findings are particularly pertinent These morsels were absent one year, one force sales at very low prices. An
for investment trusts where the closed- but reappeared the next, following investment trust manager, by comparison,
end structure allows managers to hold constructive feedback from my own is never a forced seller.”
more concentrated portfolios and take a good self.”
longer-term view on them,” said Sobczak. G OV ER N A N C E
PR I C IN G Both investment trusts and ETFs have
M A N AG EM EN T Another key difference is pricing. While a board of directors. “The board of the
he range of levers that managers of
T ETFs typically trade at net asset value or investment company has more teeth
investment trusts have to pull in running very close to it, investment trust shares in that it could realistically fire an
their portfolios also contribute to them can trade at significant discounts or underperforming manager – not ever
being able to “offer exceptional value”, premiums. likely to be the case for an ETF,” said
according to Kohn. Carthew at QuotedData. Sullivan at
Buying shares at a discount that later
Tyndall also points to greater oversight
Managers can retain up to 15% of the narrows augments returns (though,
and scrutiny among investment trust
income their investments generate of course, discount widening has the
boards. “In a world that is becoming
each year to distribute in leaner years. opposite effect). This is among the
more aware of ESG [environmental,
They can also enhance returns in rising reasons that wealth manager Philip J
social and governance] factors, it could
markets by employing gearing. “With Milton & Co, a staunch value investor,
be argued that the independent board
trusts you are getting a lot more,” uses investment trusts extensively.
of an investment trust offers a layer of
said McDermott.
“We do so because of their technical governance that is not seen so explicitly
An additional benefit that investment opportunities, such as discounts, income in ETFs,” he said.
trusts hold over ETFs is what John reserves which were so valuable last
Newlands, founder of Newlands Research, year and gearing which boosts returns in The investment trust
calls the “human side”. buoyant times. We have no axe to grind sector is governed by the
“By this I mean that shareholders’
but inevitably dwell mainly in the best Association of Investment
value space as we see it for the client,”
money is managed by identifiable
said founder Philip Milton.
Companies’ 2019 code,
real people. Even if owning only a few which sets out a framework
shares, individuals have the right to vote, The fact that ETFs are compelled to trade
attend AGMs and even to meet the fund regardless of value can cause problems,
of best practice and has
managers and board. Try asking that in as was evident last April when they got been endorsed by the
the quasi-derivative murk that clouds swept up in plummeting oil prices. Financial Reporting Council,
the underlying processes behind some
“Had oil ETFs not existed would the whose mission it is to
ETFs. I particularly enjoy Alliance Trust’s
AGMs, which are always hugely attended
negative underlying commodity prices promote transparency and
have arisen?” asked Milton. “An ETF integrity in business.
– and at which are served some of the
has no choice but to trade, so a very
best individual minced steak pies you
popular illiquid assets one could force
will ever eat.
asset prices very high and an unpopular
“The code puts shareholders at the front “ETFs have the benefit of intraday dealing, “You don’t run Tiger Roll in the Derby, nor
and centre of all it strives to achieve,” unlike other open-ended collectives, and I would you enter Frankel for the Grand
said Sullivan. “It addresses performance think active ETFs will continue to grow for National,” he said. “In other words, the
and risk, transparency, cost, liquidity this reason but that will likely be at the investment trust ‘stayer’ may be more
and communication – key observations expense of open-ended peers as opposed attractive for the long-term investor than
of many investors when doing their due to investment trusts. Investment trusts the more youthful and short-term ETF.”
diligence on an investment. still have the leverage and opportunity to
IpsoFacto’s mainstream investment trust
invest in less liquid assets that would not
portfolio used a FTSE 100 ETF in the
“When it comes to governance standards be feasible in an ETF structure.”
recent past but has since switched to
investment trusts that subscribe to the
an investment trust standing at a good
AIC code will be hard to beat. Even if it H O L D IN G PER I O D
discount.“The advantage of using ETFs
comes at a marginally higher cost to the None of this is to say that ETFs do not as tactical plays, particularly in turbulent
investor, there is something to be said for have a place. “The multiple structures periods, is that the investor avoids the
being able to sleep a little easier.” through which one can invest offer the risk of discount widening and the effect
investor a wonderful menu of options and of gearing on the downside,” said Liddell.
E XPOSURE there’s seldom a right or wrong answer,”
Through ETFs, investors can get exposure said Sullivan. Yearsley at Shore added, “For the long-term investor who does not
to more niche areas such as currency “They all play a part in a modern, want to make too many tactical
and commodity markets – anything diverse portfolio.” plays the investment trust with its ability
from wheat, biofuels and water to lean to be purchased at a discount to net
For David Liddell, a director of online asset value, an element of gearing and
hogs and live cattle – as well as more
advisory investment service IpsoFacto usually relatively attractive fees remains
mainstream equity and bond markets.
Investor, ETFs are best deployed a better bet.”
“You can reflect esoteric ideas through for short-term, tactical moves and
ETFs – sometimes nothing in the investment trusts for longer-term
investment trust space exists for what strategic positions.
you want to do,” said Milton.
At present, his client portfolios have
reasonable weightings to three defensive
ETFs – one that profits from sterling
strengthening against the euro, another
that tracks the price of coffee and a third
the price of aluminium. He has also made
a small allocation to the cheap Turkish
stock market through an ETF.
Investment trusts, meanwhile, are well
suited to investing in less liquid assets,
such as alternatives, private equity and
smaller companies, as well as enabling
investors to take diversified or focused
exposure to stock and bond markets.
Their closed-end structure means their
managers do not need to consider the
liquidity of the underlying assets as much.
“An ETF that has exposure to illiquid
assets could come a cropper if a large
portion of the investor base decided to
sell at the same time, potentially making
it a forced seller of an illiquid asset at a
price that is well below its true value,”
said Jon Smith, head of research at
Casterbridge Wealth.
NEW BOARD
MEMBERS
As part of a succession plan, two S A R A H B AT E S , DE AN BUCKLE Y
new Non-Executive Directors N O N-E X EC U T I V E N O N-E X EC U T I V E
joined the Alliance Trust Board D IR EC TO R D IR EC TO R
in March. Sarah Bates and Dean Sarah joined the Board in 2021. Sarah is Dean joined the Board in 2021. Dean is
Buckley both bring skills and currently Chair of Polar Capital Technology currently Chair of the Audit Committee,
experience that will complement Trust plc and a Non-Executive Director of Remuneration Committee and Senior
those of the current Directors. Karl Worldwide Healthcare Trust plc. Sarah is Independent Director of JPMorgan Asia
Sternberg, Senior Independent also Chair of the John Lewis Partnership Growth & Income plc, Senior Independent
Director (SID), who joined the Trust for Pensions and is an independent Director of Fidelity Special Values PLC and
Board in 2015, will be stepping member of the investment committees a Non-Executive Director of Baillie Gifford
of the BBC Pension Scheme and of the & Co Limited and Smith & Williamson
down on 30 June. Two others
University Superannuation Scheme. Fund Administration Limited.
are also expected to stand down
over the course of the next two Sarah is a Fellow of CFA UK and was Dean is a qualified actuary and has
years. Sarah will succeed Karl as previously Chair of the Association of enjoyed a career in fund management.
SID, whose role it is to provide Investment Companies. Sarah was Dean was previously Chief Executive
a sounding board for the Chairman also previously Chair of Merian Global Officer of Scottish Widows Investment
Investors Limited, St James’ Place plc, Partnership. Prior to that, Dean held
and serves as an intermediary for
JPMorgan American Investment Trust plc, several positions at HSBC Bank plc, most
other Directors and shareholders.
Witan Pacific Investment Trust plc (now recently as Chief Executive Officer of
The SID also leads any discussions
Baillie Gifford China Growth Trust PLC) HSBC Asset Management UK & Middle
on the appointment of a and chair of the audit committees of New East. Dean held senior fund management
new Chairman. India Investment Trust plc and of U and positions at Prudential Portfolio Managers
I Group plc. She was a founder of the and was also previously a Non-Executive
Diversity Project and is currently Chair Director of Saunderson House Limited.
FIND OUT MORE
of the Diversity Project Charity and an
Ambassador for Chapter Zero. “ Our multi-manager
approach to investing
“Alliance Trust’s portfolio smooths out the peaks and
is responsibly managed troughs of performance
and built for resilient normally associated with
long-term performance.” a single manager.”WHY THE
BOARD
MATTERS
By Alliance Trust
In the wide world of investment, are not abused, with appropriate risks performance, allocating capital, and
putting your faith into a fund, monitoring and processes followed. holding them to account on decisions
a manager, a company, can be It is also able to hold the investment affecting the overall portfolio. As an extra
manager to account over performance, layer of defence, the board and Willis
daunting. Will your pot of cash be
raising concerns and asking the important Towers Watson have also employed the
safe? Will the company do its best
questions if it trends downwards. services of EOS at Federated Hermes, a
to ensure you reap a solid return?
leading stewardship service provider, to
Equally will you be treated fairly The breadth and depth of knowledge on
offer support on all matters concerning
and not be charged over the odds offer is invaluable, ensuring the trust has
sustainability and the ESG considerations
once you hand over your savings? an expert voice on a range of topics to
of the portfolio’s assets.
help it achieve its ambitions and goals.
With all investments, we can, usually, Nowhere has the power of a strong, The board also brings
rely on additional checks and balances independent Board been demonstrated together a wide range of
on funds to ensure they live up to their clearer than in the transformation of professionals with different
requirements. One of the key attractions Alliance Trust in recent years.
of an investment trust is in the multiple talents and areas of
layers of governance on offer, the type It set about overhauling a number of expertise. From risk and
key areas, changing the trust from top
that can help you sleep at night. This
to bottom. It overhauled the investment
compliance to marketing
high level of governance, in the form of
approach, bringing in a new manager and sustainability, each
an independent board tasked solely with
protecting shareholders and speaking on and with it an entirely new investment board member will bring a
their behalf, is one of the key benefits on process built on a multi-manager different specialism gained
approach to global equities. This new
offer from the investment trust sector.
equity portfolio, which saw old legacy
from real-world experience
In a nutshell, the board investments in the likes of mining across different industries
will seek to ensure the disposed of, is managed by global asset and sectors.
management house Willis Towers Watson
company is run in the best and was set a demanding performance It really does take a village, as the old
interests of shareholders target. The entire corporate structure was adage goes. At a time when the risks of
at all times and seek to also streamlined and updated. The board relying on one person, or one manager, to
protect their interests. completed all of this while ensuring that carry the fortunes of a fund or company
the 130-year-old Trust continued to pay have never been more apparent, it is
It holds those employed shareholders an increasing dividend each timely to consider the multi-faceted
by the trust to account year. The work was ambitious and purely support on offer via investment trusts.
and ensures the investment for the benefit of shareholders, a clear When combined, the different arms of
manager is fulfilling its duties. sign of the professional oversight and the Alliance Trust management – all
care taken to future-proof the trust for overseen by the board – create a veritable
The benefits to shareholders of the trust generations to come. army of experts dedicated to ensuring
are wide-ranging. The board will monitor the company runs as smoothly and
The board’s decision to appoint global
fees and charges, pushing to keep levels successfully as possible. With a board
asset manager Willis Towers Watson is
competitive. It will monitor if the share acting as a conduit for shareholders,
in itself a bonus for shareholders. With
price falls to a discount, or rises to a giving them a voice in decisions and
the investment team comes access to a
premium, and where necessary manage watching out for their wellbeing, Alliance
specialist global organisation’s research,
this through share buybacks or issuance. Trust is truly a trust for the long term.
tools and equity expertise. It in turn
It will ensure the funds over which the appoints and manages the underlying
investment manager has responsibility Stock Pickers for the trust, monitoringEQUITY MANAGER SPOTLIGHT
BLACK CREEK INVESTMENT
MANAGEMENT
BILL’S VIEW At Black Creek, we build unconstrained, high We are not value investors who look for cheap
conviction, concentrated portfolios that look stocks. We buy companies based on their
very different from the market and our peers. fundamentals, including an ability to grow
We believe having a differentiated view of the future cash flows and earnings, but we are
market is the only way to produce long-term cognizant of valuation. Given our contrarian
value added for our clients. nature, companies of interest are often out of
favour with other investors.
We seek out businesses that are industry
leaders and gaining market share, providing a At Black Creek, successful investing requires
reasonable return on capital, and reinvesting evaluating companies on a fundamental basis
for future growth to support their competitive and having the patience to take a long-term
Bill Kanko position. We have a long investment horizon view. As always, we will continue to look past
Founder & President when evaluating the companies in which we the noise of the markets and use volatility to
Black Creek Investment invest. This is often referred to as “time frame our advantage as we invest in a portfolio of
Management arbitrage” or a willingness to deal with near winning businesses.
term uncertainty and/or negative short-term
business results that do not ultimately matter
in the long term.
Founded in 1871, Weir Group has evolved into a The transition to a low-carbon, global economy
focused engineering technology company. Weir is also driving demand for Weir’s technology. As
partners with its clients to provide products the mining industry seeks to meet commitments
and solutions that increase resource efficiency, to reduce emissions, resource extraction
STOCK improve operation safety, and improve will require change. This transition requires
SPOTLIGHT: environmental impact and outcomes. technology to reduce energy consumption, water
usage and waste: all areas where Weir has a
WEIR With the recent sale of its oil and gas division
comprehensive and market-leading offering.
to Caterpillar, Weir has become a pure-play
mining equipment company. Weir’s know- Weir’s technology is being used to process
how provides solutions to mission-critical most of the world’s copper. The demand for
challenges in mining operations, as well as resources such as copper, will continue to
comprehensive aftermarket support covering grow as consumers and businesses adopt a
every major mining region in the world. lower-carbon footprint. For example, electric
As a leader in its industry, Weir has strong vehicles require four times as much copper
market positions in products covering mineral as internal combustion vehicles, solar energy
extraction, comminution (ore crushing), mill three times as much copper content as the
circuit and tailings management. coal power equivalent, and wind energy ten
times the copper content versus the coal
Unlike many of its peers, Weir has exposure
power equivalent.
to the necessary repair and replacement of
high-wear parts and consumables. Weir’s business is supported by the long-term
Approximately 75% of Weir’s annual revenues growth prospects for the mining industry, the
are from higher-margin aftermarket sales and strength of its market-leading product positions,
support activity, with the balance from and the resilience of its aftermarket-focused
original equipment. business model.
WEIR FAST FACTS 1871
Founded 1871 Operating in 50 countries 11,500 employees
FTSE
HQ in Glasgow 100 company Current CEO Jon Stanton
Companies mentioned are for informational purposes only and should not be considered investment advice.EQUITY MANAGER SPOTLIGHT
GQG PARTNERS
RAJIV’S VIEW At GQG, we are guided by our over-arching the case from 2017 to 2020, valuation keeps us
investment philosophy predicated upon finding focused on what in our view is the ever-crucial
(ie security selection) and creating (ie portfolio question of “what are we receiving for the prices
construction) outcomes that are focused on we’re paying?”
compounding. By doing this, we believe it sets us
Apart from seeking to drive our portfolio away
on the path to long-term, superior risk-adjusted
from the traditionally defined quality and growth
returns. Such pursuit not only serves, in our view,
packs, we believe that valuation plays a critical
as the bedrock of our stock selection process
role in minimizing the risk of permanent capital
but it also describes the inherent adaptability of
impairment (our definition of “risk”). What that
our investment approach— as we would argue
means today is, healthcare in developed markets
Rajiv Jain that compounding knows not of the arbitrary
and a few select financials are the two areas that
Chairman and CIO, definitions for which the “style box” is bound.
have found some more room in our portfolio.
GQG Partners Within our mission to compound client assets, We think these areas offer steady, highly visible
three pillars are key: quality, growth and earnings streams at reasonable prices which,
valuation. Simply stated, we believe that quality when combined with our other holdings, have
keeps you afloat even in bad times, growth—so the potential to create a unique compounding
long as it is sustained—is very valuable, and advantage for our portfolio going forward.
valuation matters. While perhaps not necessarily
A merger between Astra of Sweden and Zeneca potential growth platforms like Respiratory,
Group of the United Kingdom formed AstraZeneca Diabetes, Oncology and Autoimmune. More
in 1999. The company sells branded drugs across generally, we believe that ageing demographics
several major therapeutic classes, including globally will be a tailwind for the sector more
STOCK gastrointestinal, diabetes, cardiovascular, broadly and specifically, we believe this tailwind
COMMENTARY respiratory, cancer and immunology. The majority should benefit the platforms that the company’s
ON of sales come from international markets with pipeline is focused on. Additionally, we believe
ASTRAZENECA the United States representing close to one third that AstraZeneca’s strong R&D spend, which has
of its sales. averaged around 25% of revenue per year for the
last 5 years, should continue to put the company
We hold AstraZeneca given our positive outlook
in a strong position to capitalize on current and
on the company’s drug pipeline and potential
future opportunities.
for future earnings growth. We believe that
AstraZeneca, unrelated to Covid-related vaccine The stock is trading at a 20.0x NTM PE (trailing
developments, continues to offer an attractive risk/ 5-year average 19.9x), ROE of 22.33% (trailing
reward opportunity set, as once again we believe 5-year average 19.21%), and a dividend yield of
that attention will be placed on actual pipelines and 2.76% TTM. In our view, we believe the business
cash flows rather than headline-driven sentiment. is trading at an attractive multiple considering
The company’s portfolio is in the process the promising pipeline and potential growth
of transitioning from maturing blockbusters platforms the company has invested in recently.
(Crestor, Symbicort, Nexium) to one driven by
MASTERCARD Founded
FAST FACTS
1999 107
pipeline projects
FTSE
100 company
More than
75,000 employees Current CEO Pascal Soriot Headquartered in
Cambridge, England
Companies mentioned are for informational purposes only and should not be considered investment advice.PORTFOLIO
UPDATE
Over the first quarter of 2021, style rotations and the portfolio was able generative business with a strong balance
the Company’s total shareholder to outperform through the first quarter. sheet. In addition, there was an increase
return and NAV total return were in the position in consumer staples
Within the portfolio, Alphabet Inc, the
conglomerate Unilever. Since unifying its
3.5% and 5.9% respectively, with multinational parent company of Google,
structure, Unilever is well positioned to
the MSCI All Country World Index contributed the most to the overall
refocus the business to higher growth
(ACWI) returning 3.6%. performance of the Trust, delivering
areas, likely including selling or listing its
an absolute return of 16.8%. Internet
tea business and increasing its market
Global equity markets continued their search advertising exceeded analysts’
presence in plant-based products in
rally over Q1 following the significant US expectations, leading to a rally in the
China, India and the US. The company
government stimulus and the rollout stock over the quarter. Volkswagen also
aims to be a global leader in sustainability
of the vaccine distribution scheme, stood out as a key contributor over Q1
and its management is proactively
particularly in the US and UK. In the last returning 50.3%, the majority of which
addressing supply chain and climate-
12 months, the MSCI ACWI has rallied was delivered in March following the
related risks.
39% and is currently sitting higher than announcement of significantly higher
pre-Covid (end 2019) levels. With over operating profit than analysts’ consensus Over the quarter, we maintained the level
37% of US and 58% of British adults had predicted. Amazon Inc was the of gross gearing at the central target level
having received the vaccine the market largest detractor over the quarter, with of 10%, consistent with a more neutral
appears to be pricing in a gradual an absolute return of -5.7% as investor outlook for markets in the medium term.
return to normality. In this environment, uncertainty grew following CEO Jeff Furthermore, we removed Lomas Capital
smaller cap, value and recovery stocks Bezos’ announcement that he will be from the portfolio of Stock Pickers and
outperformed. While some riskier growth stepping down from his current role. allocated the assets across the remaining
stocks held up well late last year, they Stock Pickers (we added Metropolis
The Company’s Stock Pickers continued
gave way in the first quarter and the Capital and Sands Capital in April).
to search for favourable investments
value index outperformed the growth The portfolio continues to be structured
for the portfolio throughout the quarter.
index by 8.5% in what was a meaningful in a balanced way across ten Stock
A position was initiated in Ebara
style rotation. Pickers with different investment
Corporation, a Japanese-based global
approaches, resulting in a diversified but
We maintain our view that market cycles manufacturer of environmental and
high-conviction portfolio of stocks.
and style cycles are very difficult to time. industrial machinery. Ebara is a leader
Unlike an individual manager that typically in incinerator technology for solid waste
has a single style of investing, Alliance disposal and power generation facilities
Trust’s multi-manager approach with a using its advanced environmental LEARN more about the
mix of styles is typically more resilient to engineering capabilities and is a cashflow latest portfolio price and
performance here
Companies mentioned are for informational purposes only and should not be considered investment advice.
Past performance is not a reliable indicator of future returns.BIGGEST POSITIONS SOLD AND ACQUIRED OVER THE QUARTER
10 largest purchases – % of Equity Value of position 10 largest sales – % of Equity Value of position
Q1 2021 portfolio bought bought (£m) Q1 2020 portfolio sold sold (£m)
Target Corporation 0.7 22.6 Celanese Corporation 0.6 21.4
Ping AN Insurance 0.6 21.3 Mastercard Inc. 0.6 20.5
Daimler 0.6 21.0 Tencent Holdings Ltd 0.6 19.8
ServiceNow Inc. 0.6 19.9 Equinix 0.5 18.8
Liberty Global Plc 0.5 17.8 Nvidia Corporation 0.5 17.6
Booz Allen Hamilton 0.4 14.6 ServiceNow Inc. 0.5 16.8
ArcelorMittal 0.4 14.5 BorgWarner Inc. 0.4 13.7
Chevron Corporation 0.4 13.0 Baidu COM Inc. 0.3 10.7
Nokia 0.4 13.0 Nestlé 0.3 9.7
DBS Group 0.4 12.7 Booking Holdings Inc. 0.3 9.4
UPDATE ON BUYBACKS
At the AGM in April 2020, shareholders approved for the Company to purchase and cancel up to 14.99% of the issued share
capital. In the period since the AGM to 31 March 2021, the Company purchased 12.3 million shares at a cost of £103.3 million.
The shares were purchased across a discount range of 2.7% to 9.3%, with an average discount of 5.6%.
The discount widened from 2.9% as at 1 January 2021 to 5.7% as at 31 March 2021. In the period from 1 January to 31 March,
the Company purchased 4.8 million shares at a cost of £43 million, the discount ranged between 2.7% and 9.3%, with an
average of 5.9%.
The Trust continues to watch the discount closely, and will carry out further buybacks if the discount shows signs of
widening significantly over sustained period.
DISCRETE PERFORMANCE (%)
From 31 Mar 20 31 Mar 19 31 Mar 18 31 Mar 17 31 Mar 16
To 31 Mar 21 31 Mar 20 31 Mar 19 31 Mar 18 31 Mar 17
Total shareholder return 47.2 -12.3 8.8 3.9 39.3
NAV total return 45.2 -11.2 8.2 4.7 30.2
MSCI ACWI total return4 38.9 -6.7 10.5 2.3 32.2
IMPORTANT INFORMATION AND RISK WARNINGS
This section contains important regulatory lead to volatility in the Net Asset Value and/or seek advice from your own
disclosures and risk warnings that are (NAV), meaning that a relatively small professional adviser(s) before investing
relevant to the material in this document. movement, down or up, in the value of a in any securities mentioned.
You should read this section carefully, as trust’s assets will result in a magnified
The Alliance Trust Board has appointed
it is intended to inform and protect you. movement, in the same direction, of that
Towers Watson Investment Management
NAV. This means that potential investors
Towers Watson Investment Management Limited (TWIM) as its Alternative
could get back less than the amount
Limited (TWIM) has approved this Investment Fund Manager (AIFM). TWIM
originally invested.
communication for issue to Retail Clients. is part of Willis Towers Watson. Issued by
Past performance is not a reliable Investors should be capable of evaluating Towers Watson Investment Management
indicator of future returns. the risks and merits of such an investment Limited. Towers Watson Investment
and should have sufficient resources to Management Limited, registered office
The value of all investments and the
bear any loss that may result. Watson House, London Road, Reigate,
income from them can go down as well as
Surrey RH2 9PQ is authorised and
up; this may be due, in part, to exchange No investment decisions should be based
regulated by the Financial Conduct
rate fluctuations. Investment trusts may in any manner on the information and
Authority, firm reference number 446740.
borrow to finance further investment opinions set forth above. You should verify
(gearing). The use of gearing is likely to all claims, do your own due diligence,
Past performance is not a reliable indicator of future returns.
Notes: All data is provided as at 31 March 2021 unless otherwise stated. All figures may be subject to rounding errors. Sources: Investment performance data is provided by
BNY Mellon Performance & Risk Analytics Europe Limited, Morningstar and MSCI Inc; key trades data is provided by BNYM Fund Services (Ireland) Limited. Equity portfolio
return is the return achieved by the equity managers, and so includes the effect of any of their cash holdings (gross of their fees). Returns are quoted net of withholding taxes
(some of which are potentially recovered at a later date) and therefore potentially underestimate the managers’ relative performance.USEFUL
INFORMATION
SHARE INVESTMENT REGISTRARS
Alliance Trust PLC invests primarily in equities and aims to Our registrars are:
generate capital growth and a progressively rising dividend Computershare Investor Services PLC,
from its portfolio of investments. Alliance Trust currently Edinburgh House, 4 North St Andrew Street,
conducts its affairs so that its shares can be recommended by Edinburgh EH2 1HJ
Independent Financial Advisers (IFAs) to ordinary retail investors Telephone: 0370 889 3187
in accordance with the Financial Conduct Authority’s rules in
Change of address notifications and registration enquiries for
relation to non-mainstream investment products, and intends
shareholdings registered in your own name should be sent to
to continue to do so for the foreseeable future. The shares
the Company’s registrars at the above address. You should also
are excluded from the FCA’s restrictions which apply to non-
contact the registrars if you would like the dividends on shares
mainstream investment products, because they are shares in
registered in your own name to be sent to your bank or building
an investment trust. The shares in Alliance Trust may also be
society account. You may check your holdings and view other
suitable for institutional investors who seek a combination of
information about Alliance Trust shares registered in your own
capital and income return. Private investors should consider
name at computershare.com
consulting an IFA who specialises in advising on the acquisition
of shares and other securities before acquiring shares.
HOW TO INVEST
There are a growing number of savings and investment platforms where you can purchase shares in Alliance Trust direct.
They are primarily for investors who understand their personal attitude to risk and those related to equity-based products.
START your investment journey here
CONTACT
Alliance Trust PLC, River Court, 5 West Victoria
Dock Road, Dundee DD1 3JT
Tel +44 (0)1382 938320
investor@alliancetrust.co.uk
alliancetrust.co.uk
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