Alliance Trust (ATST)
Results analysis from Kepler Trust Intelligence
ATST generated a 12 month NAV total return of 18.6%, and a share price total return of 16.5%, compared to the 19.6% return of its benchmark, the MSCI ACWI (as of 31 December 2021).
Its relative underperformance was the unfortunate result of stylistic headwinds its highly diversified approach faces, as during the final quarter of 2021 global equity markets were led by a narrow group of mega cap tech companies.
A major change for the trust over its financial year was in substantial increase in the level of dividends it paid, reflected in the third and fourth interim dividend, which increased 32.5% year-on-year.
ATST delegated managers, Willis Towers Watson (WTW), have created what we believe is an interesting 'one-stop-shop' solution to global equity investing with outperformance potential. ATST has a diverse, low-factor-risk portfolio with all the benefits of active management, as it still has a 75% active share despite its c. 200 holdings.
ATST's underperformance versus its benchmark has been the direct result of the leadership of a handful of mega cap stocks, specially the dominance of US technology giants, with the eight largest constituents of the MSCI ACWI being US tech giants and accounting for c. 15% of the index. It was the direct result of a strong Q4 rally in these small cohort of stocks that ATST modestly underperformed, after outperforming in the three quarters prior to this.
This is the outcome of what is probably one of the worst macro environments for ATST's approach. ATST's portfolio is made up of what their delegated stock pickers believe are the most attractive long-term investment opportunities across a diverse range of regions, styles, and sectors. This means that it the underlying managers are unlikely to collectively overweight a handful of mega cap technology stocks.
Yet thanks to operational improvements and potential macro tailwinds, ATST currently wide discount may offer an attractive entry point.
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