Alliance Trust (ATST)

04/03/2021

Results analysis from Kepler Trust Intelligence

·    Today ATST released their annual results for the year ending 31 December 2021. Over the 12-month period, the trust delivered NAV total returns of 8.5%, while in share price terms the trust returned 9.4%. This compares to the benchmark MSCI ACWI Index return of 12.7%.

·    Despite the pandemic severely impacting the dividends of many companies, ATST has continued its exceptional track record of dividend growth. Over the year the trust paid out dividends of 14.38p per share, representing an increase of 3% and the 54^th consecutive year of dividend increases.

·    Looking forward, the board remain confident in the investment strategy. The high-conviction approach of the underlying managers together with the low correlation of their styles, should mean the trust is well positioned to take advantage of future alpha generating opportunities, in particular when market leadership broadens out from the small number of technology stocks that led 2020.

Kepler View

Like many other globally diversified strategies, ATST has faced a significant headwind in 2020. The pandemic has exacerbated volatility and large disparities in returns between country and sector, with US mega cap tech stocks delivering the bulk of the gains.

Against this difficult backdrop, the trust has still managed to deliver solid positive NAV returns of 8.5% and 9.4% in share price terms. We see this a respectable result from the trust and, while it has underperformed its benchmark for reasons already illustrated, it now stands to significantly benefit from a broad global recovery.

However, given the amount of uncertainty still ahead, this may not be the time to take concentrated bets on particular countries, sectors or investment styles. In that context, ATST's strategy of working with a globally diverse range of stockpickers, each one fielding a focussed 'best ideas' portfolio, may be more appropriate.

Alongside capital appreciation, 2020 saw another exceptional year of dividend growth for the trust. It was the 54^th year of consecutive dividend increases, the third most of any trust in the investment universe. Dividends were supported by revenue reserves, which provide a cushion to protect the trust's ability to continue to pay its dividend even if the underlying income from the portfolio is impaired - a feature unique to the investment trust structure.

Currently ATST is trading on a discount of 6.2% in comparison to a peer group weighted average of 3.4%. Against this backdrop, particularly for investors who look for an international equity exposure, ATST has solid appeal.

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