Both funds take a multi-asset approach and combine a negative screen, which filters out companies investing in the usual no-go areas of arms, tobacco, gambling and pornography, with a more positive approach to identifying companies with more sustainable business practices than their peers.
This combination of positive and negative elements is the strategy used across Alliance Trust Investment’s sustainable future range, and their approach is unlikely to change. While the Trust’s management may have experienced a shakeup, Ms Garrett-Cox will remain in charge of the fund management group. So even though the parent firm is seeing some dramatic changes, it will hopefully be business as usual for the funds.
While we have been happy with the performance of the group’s fund range, there has been a long-running campaign against the trust’s board from investors who are unhappy with its direction. Given that the trust has been using a similar strategy to the Sustainable Future range of funds with its equity investments, it is worth considering if these criticisms have any merit.
The charge levelled by Elliot is that the Trust has been charging too much and performing too poorly. It has been especially critical of the board for failing to address these issues and just muddling along, and paying itself excessively was the final slap in the face for investors. The company’s board for their part have been trying to make the case that the trust stacks up well compared to its peers and benchmark.
It is not an easy case to make. Looking at the total return performance of the Trust’s share price versus its benchmark and sector, the best we can say is the results do not look too bad. Alliance Trust returned 39.1 per cent, whereas the Association of Investment Companies’ global sector made 36.24 per cent and the Trust’s benchmark, the MSCI All Country World index, made 33.79 per cent.
On this evidence, the figures for three years look distinctly average, which is not a great endorsement of management, but not something that usually triggers a shareholder result. As always, though, a single snapshot does not paint a very accurate picture, and this is doubly true for investment trusts where the performance of the stock does not always reflect the true performance of its investments.
One of the charges levelled at the trust is that they have skewed the figures in their favour by selecting favourable comparators and time periods, but it has still only managed to look average. When conducting a fairer analysis of performance, it actually seems pretty woeful.
Starting with the peer group, the AIC Global sector is a pretty broad church with more than a few companies that are not really suitable for comparison. Stripping away the fund-of-funds and smaller caps, Elliot came up with three other trusts of a similar size investing in similar things and used these as a baseline for what should have been expected.
