LONDON (Reuters) - Alliance Trust (ATST.L) has no plans to review the in-house management of its 3.6 billion pounds ($5.4 billion) investment portfolio, it said on Wednesday, rejecting a key demand of activist shareholder Elliott Advisors.
Chairwoman Karin Forseke told Reuters in reply to written questions that the board recognised its responsibility to “challenge all elements” of the British investment company’s business, and said it would reflect on feedback from shareholders since the rebel investor launched its campaign to revamp Alliance’s board on March 16.
But Forseke said the existing internal management model, headed by CEO Katherine Garrett-Cox, “was well placed to execute our strategy and deliver long-term value to our shareholders”.
Alliance’s board last reviewed the structure of its in-house management in September 2014 before making changes to its equities team, Forseke said in an email.
Forseke’s comments underscore her continuing support for the Garrett-Cox before an April 29 vote on Elliott’s campaign to add three new independent non-executive directors to the trust’s board.
Elliott, which owns 12 percent of the 127-year old trust, has said the board needs new blood to address “persistent underperformance” and a dearth of ideas for improving returns, which could include the appointment of an external manager.
Forseke and Garrett-Cox have vigorously rejected Elliott’s nominations and criticisms of the trust’s costs and performance. They have warned Elliott’s plans threatened the very existence of the FTSE 250 investment firm, which is 65-percent owned by a legion of small ‘mom and pop’ investors.
“We have regularly asked the company why it persists in defending its current structure without having conducted a full strategic review,” Elliott said in a March 31 circular that urged the board to benchmark the cost and flexibility of the trust’s structure against “more successful business models.”
Elliott, which declined to comment on Wednesday, has denied it wants Garrett-Cox to step down.
Tim Ingram, a former Alliance non-executive director, has said Elliott’s push to outsource management could trigger a significant pay cut for Garrett-Cox, who has led Alliance’s investment strategy since 2007.
“The probability is the board will consider outsourcing and conclude that this does improve shareholder return. Then there’s no role for someone on 1.3 million pounds a year,” Ingram told Reuters in an interview on March 31.
Garrett-Cox, one of a handful of top-flight female executives in Europe, has declined to answer questions on her longer term future at the trust.
Elliott’s complaints about board independence, Garrett-Cox’s pay and the strategy to manage assets in-house have resonated among shareholders and proxy advisory firms.
At least five investor advisers including ShareSoc, PIRC and Tilney Bestinvest have recommended clients elect Elliott’s nominees to the trust’s board.
The trust dropped out of the FTSE 100 in 2011 and the firm’s own broker JP Morgan Cazenove has described its performance as “lacklustre”.
Garrett-Cox earned a pound for every 2,698 pounds of assets managed last year. By comparison, Andrew Bell, CEO of Witan Investment Trust, one of Alliance’s closest peers, earned 544,514 pounds — a pound for every 3,246 pounds in assets.
Alliance has not publicly addressed criticism of Garrett- Cox’s remuneration but has pointed to her protection of the firm’s 48-year record of dividend growth.
It has accelerated a search for a new non-executive board member and said it would consider any candidates put forward by shareholders.
Editing by Mark Potter