Alliance Trust sticks with sustainability as Garrett-Cox quits board

Governance overhaul despite ESG strategy smashing MSCI ACWI

Alliance Trust says it is sticking with its focus on sustainability while its CEO Katherine Garrett-Cox is to exit the board having been a target of activist hedge fund Elliott Advisors.
It’s part of a governance overhaul that will see Garrett-Cox remain CEO of fund management arm Alliance Trust Investments (ATI) though she will depart the board of Dundee, Scotland-based Alliance Trust plc.
Founded in 1888, it operates the largest investment trust in the UK and is a signatory to the UN-backed Principles for Responsible Investment.

In a raft of changes, Chief Financial Officer Alan Trotter is also leaving while former Deutsche Asset Management equities head Karl Sternberg – who joined the board last month – will chair a new ‘management engagement committee’ to review investment performance.
Susan Noble, the former Goldman Sachs Asset Management global equities head, will become chair of Alliance Trust Investments but retire from the board of Alliance Trust plc.
But the focus on sustainability and ESG investing heralded by the appointment of its former Head of SRI Peter Michaelis as Head of Equities just over a year ago will remain. The firm’s ESG approach is to identify value-drivers via exposure to themes like climate change and sustainable consumption.As a result, Alliance Trust says its equity portfolio has outperformed the MSCI All Countries World Index, the new benchmark, another change, by 2.3% over the past year.

Michaelis and his team including Investment Manager Simon Clements joined from Aviva Investors in 2012. If the team does not deliver against the new benchmark, a move to external managers will be considered.

Broker Numis said there would continue to be pressure on the investment team “and if the SRI approach fails to deliver a sustained improvement in performance it will become increasingly difficult for the board to ignore calls for more radical action”.

But the board said it “has confidence in the ability of the investment team to deliver the returns expected by shareholders”.

The developments follow “extensive consultation” with shareholders. The changes will see a focus on global equities and the disposal of “non-core” investments such as legacy mineral rights, property and fixed income. A £125m private equity portfolio will be run down and the proceeds re-invested into equities over time.

Elliott, arguing Alliance Trust’s performance had been poor, campaigned for board changes. There was a truce in April when AT agreed to appoint two of the three board candidates that Elliott had proposed.