Alice Rigby
View profile
Updated 09 Mar 2023
Save Article Download

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Alliance Trust. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

  • Alliance Trust has posted strong relative performance for the year ended 31/12/2022, achieving a total shareholder return of -5.8% and a NAV total return of -7.1% which compares to a -8.1% return for its benchmark index, the MSCI ACWI, and an average return of -20.3% among peers in the AIC Global Sector.
  • The outperformance versus peers was aided by the portfolio’s balanced style, which meant it avoided the worst of the dramatic declines in growth stocks.
  • This good relative performance has continued post-year end, with the trust’s NAV total return up 9.8% in the year to 09/03/2022 compared to a total return of just 6.4% for the MSCI ACWI Index.
  • The company has raised its ordinary dividend to 24p per share, a 26% increase on 2021, maintaining its AIC Dividend Hero status.
  • Over the year the discount averaged 5.9%, the board buying back 15.5m shares to help keep the discount narrow.
  • Chairman of the board, Gregor Stewart, said: “We are pleased that our performance was more resilient than the market and ahead of most of our peers in the AIC Global Sector.”

Kepler View

Alliance Trust (ATST) provides investors with a “core” allocation to global stock markets. Global investment consultancy Willis Towers Watson (WTW), which manages the overall portfolio, brings together a group of sophisticated investment managers from across the world into a highly diversified portfolio. Crucially, the team aims to ensure the trust has no significant overweights to any particular style or factor.

The WTW process, inducted in 2017, has produced muted performances versus peers in recent years, as markets rewarded other managers who were more fully tilted to the growth style. However, WTW’s style-balanced approach is intended to produce relatively smooth returns over the long-term, including both capital growth and a rising dividend. If the proof is in the pudding, then the trust’s ability to hold up well compared to peers over the course of a tumultuous 2022 for global equities shows that investor’s patience is now being rewarded. The strong performance in 2023 so far could be further evidence that the tide has shifted in ATST’s favour. Furthermore, ATST’s significant increase in the dividend – and the board’s clear indication that they expect the 56-year track record of increasing dividends to continue – means that it is beginning to meet both its objectives. With the meaningful increase in the dividend, ATST now offers a dividend yield of 2.9%, which compares favourably with the AIC Global sector average yield of 1.24%.

While the trust is neutral when it comes to style or factors, this does not mean it is passive. The current portfolio blend, which results from manager selection rather than WTW taking a tactical direction, does have some differences to its benchmark. For example, the trust is currently overweight the UK and relatively underweight North America. These positions are largely reflective of the active investment approaches of the underlying fund managers, who allocate independently of one another.

In terms of outlook, WTW have indicated that they remain on the cautious side near-term, with earnings expectations still optimistic given the economic risks currently at play. As a result, they have kept gearing on the low side of its long-term strategic position of 10%. Despite this, the trust’s underlying stock pickers have suggested that market volatility is leading to some mispricing and therefore opportunity.

Overall, the trust’s strong performance over 2022 confirms our view that ATST embodies the ‘fire and forget’ portfolio that it has long sought to be. The board’s reinvigorated commitment to the trust’s dividend growth and WTW’s continued execution of its style neutral investment approach both suggest that the trust is well-placed to deliver its objectives in a tumultuous market and economic context.

Login to read the full article...

Kepler Trust Intelligence provides research and information for professional and private investors. In order to ensure that we provide you with the right kind of content, and to ensure that the content we provide is compliant, you need to tell us what type of investor you are.

Continue

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.