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Alliance Trust: March 2022 investment trust update

Investment Analyst Henry Ince shares our analysis on the manager, process, culture, cost, and performance of Alliance Trust.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • Willis Towers Watson hunt for what they believe to be the best stock pickers and blend them together in this trust
  • The trust’s impressive dividend record continued after increasing for the 55th consecutive year
  • Investing more in small and medium-sized companies than the benchmark was one of the biggest headwinds for performance over the past financial year

How it fits in a portfolio

Alliance Trust aims to grow an investment and provide a rising income over the long term by investing in companies from around the globe. Larger companies from developed markets are the primary focus but it also invests in higher-risk smaller companies and emerging markets.

Historically, the trust invested in a range of different assets alongside company shares, such as bonds, mineral rights, and private equity. Today it adopts a multi-manager approach, which means portions of the trust are run by different fund managers, and it’s solely focused on shares. This means there's plenty of diversification on offer. The trust could be used for income or to bring international diversification to a UK-orientated portfolio.


This trust is managed by ten fund managers, most of which are not accessible for individual UK investors. Each manager creates a portfolio of approximately 20 companies, from wherever in the world they choose. They each have their own strengths, styles and areas of focus which are carefully blended together to create a diversified investment trust.

The managers are selected by the Investment Committee at Willis Towers Watson. The Committee is chaired by Craig Baker, Global Chief Investment Officer, who is supported by co-managers Stuart Gray and Mark Davis. The team can also tap into the expertise of around 130 analysts and portfolio managers from across the globe.


The Investment Committee believes that the majority of stock pickers outperform with their highest conviction investments but hold back returns with their smaller holdings. That’s why they only let most of their underlying managers invest in their 20 best ideas. This number is big enough to spread risk and is also a manageable number of companies to keep on top of.

To whittle down a universe of over 1,600 managers globally, the team conduct detailed analysis to ensure they meet their criteria. Managers must possess a competitive advantage and be able to maintain this edge to stay on top of their game over the long term. The most important aspect is the people themselves. That’s why they spend a great deal of time understanding their motivations, experience, and who’s influenced them throughout their careers. The team also consider how these managers are aligned with their investors, whether that be through equity in the business they work for or a significant co-investment.

Information is widely available so it’s critical for them to understand how these managers are synthesising it better than others. Whilst the number crunching and length of their track record is important, their judgement is largely made through their qualitative work. Their dominant market position means they get great access to meeting stock pickers, their research and are able to sit in on company meetings. This work is ongoing, and they will meet with managers numerous times before taking a view.

Currently they have ten different managers whom the Investment Committee blend together in the trust, ensuring there isn't too much risk at a company, sector, or geographical level. They also want to maintain a balanced portfolio in terms of investment styles.

North America accounts for nearly 60% of the trust making it the largest country allocation, although this is less than the benchmark. In contrast, they invest more in Europe, particularly the UK. Sector wise, they find most opportunities within technology, communication services and financials.

In the past financial year, the team terminated their investment with Lomas Capital Management following its decision to wind-down following two senior manager retirements. This money was spread across two new investments managed by growth-focused Sands Capital Management and value-orientated Metropolis Capital. More recently, they’ve reduced their weighting to Lyrical Asset Management following a strong period of performance in favour of Veritas Asset Management who take a more thematic approach.

Some of the managers invest in smaller companies, emerging markets or use derivatives to help them invest, which all increase risk. The trust uses gearing (borrowing to invest) to try to boost returns. Gearing can also increase losses though, so it’s a higher-risk approach.


Alliance Trust was founded in 1888 and is a constituent of the FTSE 250 index. Today it’s managed by Willis Towers Watson (WTW), a large consultancy firm with over 45,000 employees across 140 countries. This is the first investment trust they’ve managed but WTW has invested this way for much longer on behalf of institutional clients. When selecting managers, they pay close attention to the underlying culture, alignment, and operational resource of the firms they work for.

The underlying managers must have a demonstrable framework in place to identify and monitor environmental, social and governance (ESG) factors for the companies they invest in. In 2021, the board also set a target of net zero greenhouse gas emissions from the trust by 2050.


The ongoing annual charge over the trust’s financial year to 31 December 2021 was 0.60%, a decrease from 0.64% for 2020. Investors should refer to the latest annual reports and accounts, and Key Information Document for details of the risks and charging structure. If held in a SIPP or ISA, the HL platform charge of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. The platform charge doesn’t apply if the trust is held in a Fund and Share Account.


Since WTW was appointed as manager in April 2017, the trust’s performance has been marginally ahead of other globally focused investment trusts. Over this period its Net Asset Value (NAV) has grown 54.19%* vs 50.75% for the AIC Global sector. Its share price also rose 53.41%. Remember past performance is not a guide to the future.

Over the trust’s last financial year to the end of 2021, its NAV grew 18.51% vs 12.99% for the AIC Global sector. The share price also rose 16.51%. However, this was marginally behind its benchmark, the MSCI ACWI, and only three of the ten stock pickers outperformed their respective benchmarks. All investments fall and rise in value so you may get back less than you invest.

Strong revenue growth helped Alphabet, the company responsible for Google to become the biggest driver of returns over the year. Increased demand for semiconductors was positive for another of their US holdings, Nvidida which is held by two of their stock pickers.

Whilst it was still a good year in absolute terms, investing more in small and medium-sized companies than the benchmark held back returns. In addition, not owning some of the largest US companies like Apple and Tesla was a headwind following large rises in their share prices over the year. Increased regulation in China was also a headwind for holdings in the region like internet company Baidu and New Oriental Education.

The total dividend per share for the year to 31 December 2021 was 19.05p, which is a 32.5% increase on the previous 12-month period. This trust is an AIC ‘dividend hero’ having increased its dividend for the 55th year in a row. At the time of writing the trust trades on an 8.14% discount and has a dividend yield of 2.11%, although remember yields are variable and aren’t a reliable indicator of future income.

Annual percentage growth

Feb 17 – Feb 18 Feb 18 – Feb 19 Feb 19 – Feb 20 Feb 20 – Feb 21 Feb 21 – Feb 22
Alliance Trust 10.47% 1.56% 3.60% 19.25% 11.94%
AIC Global 15.95% 4.01% 0.45% 22.12% 3.34%

Past performance is not a guide to the future. Source: *Lipper IM to 28/02/2022.



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    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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