Dundee in 1870
Dundee was a wealthy industrial town, centred around the jute industry that employed 40,000 people at its peak. As the pace of growth of the industry diminished the business owners sought out investment opportunities from further afield, building on their experience of overseas markets that included selling jute to both sides in the American
The Oregon and Washington Trust Investment
Although Alliance Trust PLC was incorporated in 1888, it can trace its origins back to 1873 and the founding of The Oregon and Washington Trust Co Ltd, which was set up in Dundee to lend to pioneer farmers in the Pacific North West of the United States.
The Dundee Mortgage and Trust Co Ltd
The Dundee Mortgage and Trust Company was founded in 1876 with a broad remit that permitted it to lend to farmers throughout the United States, Canada and throughout “the other Dominions of Her Majesty”. The companies also took the powers to invest in stocks and bonds.
The Dundee Land Investment Co Ltd
The final part of the founding of The Alliance Trust came from the creation of The Dundee Land Investment Company. It was a property development company which bought land near growing towns and railroads with a view to profiting from the development of the land around it.
By 1879, the similarities with The Oregon and Washington Trust Investment Co were obvious and the decision was made to merge it into the Dundee Mortgage and Trust Co. One of the directors of the latter was Dundee-born Robert Fleming, founder of the eponymous investment bank, who also founded The Scottish American Investment Trust.
The Hawaiian Investment and Agency Co Ltd
The Hawaiian Investment and Agency Company was founded by Dundonian businessmen, headed by Alexander Gourlay, who was also behind the Oregon and Washington Mortgage Savings Bank Ltd. Among its 218 initial investors, 170 were from Dundee and 17 were from Hawaii, including the reigning King and some of his ministers.
The Dundee Land Investment Company Ltd was renamed the Dundee Investment Company Ltd.
The Hawaiian Investment & Agency Co Ltd was reincorporated as The Western & Hawaiian Investment Company Ltd, giving it a wider investment scope as interest rates in Honolulu restricted opportunities as compared to those available in Texas and other parts of the Western United States.
The Alliance Trust Co Ltd
The directors of the Dundee Mortgage & Trust Ltd and the Dundee Investment Company joined forces and incorporated The Alliance Trust Company Ltd on 21 April 1888. This was partly in response to a change in legislation in Texas which required that foreign companies could not operate in Texas, unless they undertook a similar business in their country of origin.
John Guild, Chairman of The Alliance Trust advised shareholders at the Annual General Meeting to "put not your trust in riches, but put your riches in Trust"
William McKenzie took on the role of Secretary. His job title, but not his responsibility, was changed in 1912 to that of General Manager. He retired in 1919, after 45 years of service to The Alliance Trust and its predecessors. John Guild, the first Chairman of The Alliance Trust died in 1892. For the next 21 years, The Trust had no Chairman.
£75,000 was loaned against the 500,000 Acres Goodnight ranch, owned by Charles Goodnight, who is credited as having been the inspiration for the film “The Searchers”, starring John Wayne. A subsequent loan defaulted in 1933, but the State of Texas took over the lease, created a national park and repaid the loan in 1945.
The importance of the investments in securities as a proportion of the total asset was increasing. The value of mortgages issued by The Alliance Trust stood at £1.2m, while investments in shares, mainly US railway bonds, but also including shares in a Japanese colliery and a railway company in Hokkaido, stood at £1m.
Although the idea was first muted in 1904, in 1918, The Western & Hawaiian Investment Company formally asked The Alliance Trust to take over management of its assets. The companies shared offices and some agents and for a fee of £360 per annum the arrangement was agreed. So began the "longest engagement in corporate history."
W.D. MacDougall, who had been appointed Secretary in 1912 succeeded William McKenzie as Manager. He worked for The Alliance Trust for 40 years as Secretary, Manager, Joint Manager and ultimately Chairman; the post he still held when he died aged 80 in 1952.
Alliance Trust first bought into Shell in the 1920s. It has been present in the portfolio ever since.
Between 1920 and 1930, the total cost of investments in the portfolio rose from £4.6m to £10.1m.
The Western & Hawaiian Investment Company was renamed The Second Alliance Trust. Although it had largely withdrawn from Hawaii and invested in the mainland United States, its timing was poor as prices and valuations were depressed following the First World War.
The Trusts withdrew from the mortgage business at a time when almost 40% of the $12m loans were either in default or making irregular payments. Net mortgage yields had fallen to 5.75%, which barely covered the debenture interest of 4.75%, and a portfolio of shares was yielding 6.75%.
Oil was found beneath a 6,000 acre cotton plantation in Louisiana that The Alliance Trust owned. Between then and 1958, the field generated over $2m in mineral royalties to the Trusts. The Trust continues to hold mineral rights on land in Louisiana, Oklahoma, Texas & Saskatchewan in Canada.
At the time of the outbreak of the Second World War, 2/3rd of the portfolio was invested in the UK, mainly in fixed interest, and 14% was invested in the US. This marked a significant turnaround from the position 25 years earlier when The Alliance Trust had 83% of its assets invested in the US.
The Trust sold its stake in the Chavez Grant in New Mexico to the US Government, originally as an Indian reservation, but it is best known as the Los Alamos atomic development site.
Alan Brown, who had previously been a partner at Baillie, Gifford & Co in Edinburgh became Joint Manager with W.D. MacDougall. T.J. Carlyle Gifford, founder of Baillie, Gifford & Co, and David McCurrach were posted to the US to oversee the sale of requisitioned assets in the US to help fund the war effort.
W.D. MacDougall became Chairman. He was to hold the post until 1952.
By the end of the Second World War, the total cost of investments were £11.2m.
The Matador Ranch was sold in 1951. Alliance Trust had remained a shareholder and held directorships of the ranch up until the sale. The Dundee Mortgage & Trust Co, under Robert Fleming had originally acquired the ranch in 1882.
David McCurrach, served the company as Manager, Director and Chairman for over 40 years, retiring in 1980. Having spent much of the War in the US, following the war, he sought to build up the US portfolio of the Trusts. The Alliance Trust was able to describe itself as a US resident for tax purposes, which reduced the cost of investing in the US.
Total investments rose from £18m in 1950 to £139m. 20 years later, an 8 fold increase, with the value of the portfolio rising in 18 of the 20 years.
Equity markets collapsed 1972 and there was a secondary banking crisis in 1974. RPI during the decade was 170%, but dividends increased by only 45%. Despite the US economy outperforming that of the UK, the effect of taxation and foreign exchange movements reduced the benefit to the Trust.
David McCurrach retired as Manager in 1976, and the roles of Joint Managers was taken on by George Stout and Lyndon Bolton.
The investment portfolio was valued at £138m.
Alliance Trust first bought shares in Walmart. When the shares were sold in 2006, the weighted average purchase price was around 7 cents. The last shares were sold on 31st January 2007 at a price of $47.20. Over the 30 years the shares were held, the share price rose at an average rate of 24% per year before dividends.
Robert Smith is appointed Chairman of the Trusts and served until 1997.
Net Assets were over £150m in 1980 and reached £693m in 1990.
Alliance Trust Savings began as a savings scheme that was run for the shareholders of the Trusts but following the launch of PEPs, it became an investment trust ‘supermarket’. Within the accounts it administered investors could not only hold Alliance Trust shares but shares in other companies as well. In 2013, it administers over £4bn of assets on behalf of over 60,000 customers.
Gavin Suggett takes over as Chief Executive.
Net assets exceed £1bn for the first time.
Bruce Johnston becomes Chairman of The Trusts. The investment portfolio was valued at over £1bn for the first time in 1994, and at end of 1997, it was valued at over £1.3bn.
Lesley Knox joins the Board of the Trust. She became Chairman in 2004, following the retirement of Bruce Johnston.
At the end of the Millennium, the investment portfolio and net assets were £1.9bn.
Alan Harden becomes Chief Executive of The Alliance Trust and The Second Alliance Trust. Under his tenure The Alliance Trust and The Second Alliance Trust merged after 88 years of sharing staff and offices. He also set in train the modernisation of Alliance Trust Savings.
Lesley Knox became Chairman of The Alliance Trust and The Second Alliance Trust. Gavin Suggett and Bruce Johnston both retired. The investment portfolio was restructured into five regional portfolios, replacing a matrix of sector and regional sub-funds.
After 88 years of sharing offices and management expertise, The Alliance Trust PLC and The Second Alliance Trust PLC merge to form Alliance Trust PLC. The merged entity is largest generalist investment trust in the UK. Net assets of The Alliance Trust exceeded £2bn for the first time in January 2006.
In January 2006, the Annual Report announced that the Trust’s net assets had exceeded £2bn for the first time. Less than 18 months later, net assets exceeded £3bn for the first time.
Alliance Trust became a constituent of the FTSE 100. Katherine Garrett-Cox takes over as Chief Executive upon the resignation of Alan Harden. She initiated a strategic review which would lead to Alliance Trust reverting back to its core competencies of investing in equities and fixed income.
Alliance Trust moved into its new offices at 8 West Marketgait, Dundee, ending its 89 year occupancy of Meadow House. Alliance Trust Asset Management was set up to allow investors to access the expertise of the Alliance Trust investment team in a range of targeted open ended funds.
Karin Forseke succeeded Lesley Knox as Chairman. The investment portfolio was substantially restructured to a single global equity portfolio and the number of direct equity holdings reduced to around 100. Alliance Trust Savings reported monthly profitability by the end of the year. Alliance Trust Investments was managing AUM of £1.9bn having taken on the SRI team from Aviva Investors.
Alliance Trust celebrates 125 years of investing. To mark this milestone we commissioned and published a history book of Alliance Trust called Investing for Generations. The title links to our investment strategy of investing for generations which puts customers at the heart of everything we do and focuses upon ensuring that our business remains strong and profitable for the next 125 years.
The mandate for the Trust was formally given to Alliance Trust Investments and the board was restructured. This was another milestone in the evolution of Alliance Trust with the investment mandate effectively outsourced to Alliance Trust Investments. The Board of the company was restructured to be made up of only Non-executive Directors with Alliance Trust Investments and Alliance Trust Savings forming their own independent Boards.
Lord Smith of Kelvin succeeded Karin Forseke as Chairman and Gregor Stewart was appointed Deputy Chairman.