Activist Hedge Fund Elliott Notches Win as Alliance Trust CEO Departs Board

Oct 1 2015 | 12:02pm ET

By Nishant Kumar and Matt Scuffham (Reuters) - Katherine Garrett-Cox, one of the City of London's most high profile female CEOs, is to step down from the board of Alliance Trust in an overhaul of the fund manager which has faced pressure from activist investor Elliott to make changes.

Garrett-Cox, who will continue as chief executive of Alliance Trust Investments, has long been battling demands from shareholders to tackle the fund's underperformance and the gap between its shares and the value of the assets it holds.

The 127-year old trust, with total assets of $5 billion, said on Thursday it planned to sell non-core investments, including its fixed income, mineral rights and property assets, and cut costs to produce savings of 6 million pounds next year. It plans to make its board fully independent, consisting solely of non-executive directors.

Alliance Trust will also adopt the MSCI All Country World Index as its benchmark and aim to outperform it by at least 1 percent per annum after fees.

The overhaul follows a campaign by Elliott Advisors earlier this year to improve the fund group's performance and reduce its discount to net asset value.

Alliance Trust had agreed a ceasefire in April with Elliot, its largest individual shareholder, agreeing to revamp its board by appointing two of the three directors backed by Elliott.

Elliott, which has a 14 percent stake in Alliance Trust, declined to comment.

"The actions announced today, taken together, represent some of the biggest changes in our history and are designed to further improve shareholder value," Karin Forseke, chairman of Alliance Trust said in a statement.

Alliance Trust's shares rose nearly 4 percent, narrowing the discount to its net asset value.

Before the announcement, the shares traded about 12.4 percent below its net assets. That compared with 4.9 percent for its peers, which include Scottish Mortgage and F&C Investment Trust, data from trade body AIC showed.

"We see this as step one in an evolutionary process," Roger Lawson, deputy chairman of shareholder advisory group ShareSoc said in a statement.

"But it is not clear that these changes will quickly make the Trust more attractive to investors, or ensure that Elliott Advisors do not come back with more demands for changes in the future."

The group will also create separate boards for its fund management division Alliance Trust Investments and its Alliance Trust Savings business to increase accountability.

It said if its performance does not consistently deliver against its new benchmark, it will begin a full review and consider external managers.

"It is not quite clear where the changes will leave Katherine Garrett-Cox in the long term. Her influence over the board has been significantly reduced," Charles Cade, analyst at Numis said.

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