US fund steps up attack on Alliance Trust's Garrett-Cox

Boxing Gloves

Elliott Advisors has accused Alliance Trust of using scare tactics to repel its proposed shake-up of the investment company and has stepped up its attack on chief executive Katherine Garrett-Cox.

The activist US hedge fund, which is seeking to woo at least 50,000 retail investors to force change at the 127-year-old Alliance Trust, set out its criticisms in a 12-page document.

Elliott said Alliance Trust had:

  • persistently performed worse than other investment trusts and indexes
  • maintained high costs despite claiming to be managing those costs
  • relied on “one-off effects and unusual accounting” to support its profits and dividend

In a response to Alliance Trust’s earlier rejection of its proposals, Elliott said: “The company has put spin before facts and attacks the messenger rather than the message in a cynical attempt to avoid an open and honest debate about the serious issues facing the company.”

Elliott, which has built up a 12% stake in Alliance Trust since 2010, sought to increase the pressure on Garrett-Cox, one of the most high profile women in the City who earned £1.34m last year. It said she had received at least half her annual bonus in each of the past six years despite failing to match performance against other trusts in all but one of those years.

“Since Katherine Garrett-Cox became chief executive of Alliance Trust in August 2008, she has presided over persistent underperformance,” Elliott said. “Pay for underperformance is a sign of a board which is not demanding enough of the executive and which fails to hold it to account.”

Elliott’s attack is the latest instalment in a battle that broke out in mid-March when the fund called for Alliance Trust to instal three Elliott nominees to the board. Elliott, the trust’s biggest shareholder, said the board revamp was needed to correct poor investment performance, high costs and weak governance.

Alliance Trust rejected the nominees and said Elliott was acting in its own short-term interest. Last week Alliance Trust published a detailed rejection of Elliott’s points in a circular to shareholders.

The US fund wants Alliance Trust shareholders to vote ex-investment bankers Anthony Brooke and Rory Macnamara and former fund manager Peter Chambers on to the board at the Dundee-based trust’s annual general meeting on 29 April.

Elliott’s campaign received support over the weekend from Tim Ingram, a former Alliance Trust non-executive director. Ingram said investment performance had been “dismal” and urged other shareholders to support Elliott’s board nominees.

Analysts at JP Morgan Cazenove, Alliance Trust’s corporate broker, said: “Elliott’s response this morning and the strongly worded attack by a former non-executive director of the company both land a few heavy blows. It is hard to deny that performance has been lacklustre.” But the analysts added that Garrett-Cox and her team could argue that financial performance was improving.

Elliott’s attack is the second time in four years that Alliance Trust has been targeted by an activist investor. Another fund, Laxey Partners, tried and failed in 2011.

A spokesman for Alliance Trust said: “Alliance Trust has clearly set out its reasons for rejecting Elliott’s request in its circular to shareholders last week. We encourage all shareholders to read the circular in full.”

Powered by Guardian.co.ukThis article was written by Sean Farrell, for theguardian.com on Tuesday 31st March 2015 16.17 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010

 

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