Alliance Trust (ATST)
Results analysis from Kepler Trust Intelligence
Alliance Trust (ATST) released its interim results this morning showing an NAV total return of 14.8%, outperforming its benchmark - the MSCI All Country World Index (MSCI ACWI) - by a margin of 3.7% over the six months to 30 June 2021.
The trust's strong performance was primarily driven by stockpicking; its high conviction 'best picks' approach and strong suite of underlying managers working well in an environment where wide spreads were witnessed between the performance of individual companies.
Despite the trust's strong performance, negative investor sentiment toward the AIC Global sector as a whole meant total shareholder returns were slightly less (11.1%) as the discount widened during the period to stand at 6.3% at close of business last night, wider than the peer group average.
The board has also announced plans to review the level of funding behind the dividend, which could have interesting implications in our view.
The last six months provide an interesting picture, in our view, of what is possible for Alliance Trust (ATST).
Willis Towers Watson (WTW) took over as managers of the trust in 2017, and spent much of the first year of their tenure renovating what was at the time a very large, very dull portfolio and turning it into the animal we know today - a series of 'best picks' portfolios managers by leading stockpicking managers identified by WTW all around the world.
With that job done, the newly revamped trust was then faced with a momentum driven market where investors were piling into trends and themes with little regard for individual companies' fundamentals. This began in 2019 and continued, via even greater momentum shifts between growth and value during the most intense phases of the COVID crisis, until the first quarter of this year.
Against that backdrop - the overhaul of the portfolio and disposal of old assets, and then a long momentum driven rally totally unsuited to stockpicking strategies - WTW have delivered a creditable outperformance of the benchmark MSCI All Country World Index (MSCI ACWI) of 1.2% since their appointment1.
Over six months, however, in an environment where company fundamentals have once again been absolutely at the forefront, the managers selected by WTW have been able to show their true colours, delivering a solid 14.8% NAV total return and putting a chunky 3.8% margin of outperformance between the trust and the benchmark.
This outperformance coincides with a number of initiatives at Alliance Trust, including a commitment to make the portfolio carbon neutral - which should appeal to growing numbers of investors as public consciousness continues to focus on this issue - and to review the way in which the dividend is funded.
As we discuss in our analysis of these results, we believe there could interesting implications for Alliance Trust, particularly if performance continues to be strong.
1 - 1 April 2017 to June 30 2021
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