1 May 2018 Craig Baker, Global Chief Investment Officer, Willis Towers Watson

An alliance of best ideas: A transformational year

Alliance Trust has hit an important milestone. Not only is the Trust celebrating its 130th year, it is one year on since it launched a new approach to managing its equity portfolio – its Alliance of Best Ideas. Since it was established in 1888, the Trust has continually evolved to meet the shifting needs of investors and shareholders, whether in times of political upheaval, economic booms and busts, or indeed, two world wars. The last year has not been an exception to the rule, proving to be one of transformation and progress, following the launch of its ground-breaking new investment approach.


Our new investment strategy for the Trust provides investors with a unique global equity portfolio, combining the highest-conviction stock picks of eight of the world’s best equity managers.1 Through selection of independent managers, investors benefit from a globally diverse portfolio of around 200 stocks, as well as a highly active approach. In fact, around 80% of the portfolio’s positions differ from those of its benchmark, improving its chances of outperforming in the long-term.2

We also believe spreading stock selection across eight best-in-class3 managers will bring consistency in outperformance in the long-term, smoothing the peaks and troughs of an individual manager’s performance, without undermining the level of conviction.
The Trust’s performance targets are as ambitious as its approach. Through focusing on stocks with the highest return potential, the equity portfolio aims to outperform the MSCI All Country World Index (ACWI) by 2% per year after costs over rolling three year periods.



As investment manager, our role at Willis Towers Watson is to select the underlying managers and oversee the implementation of the new approach, drawing upon our track record of running similar strategies for institutional investors, such as the Towers Watson Global Equity Focus Fund, which has outperformed the MSCI World Index by 2.7% per annum (net of all underlying managers fees and fund expenses) since the strategy’s inception on 17 August 2015 to 31 March 20184. It is also our job to monitor the performance of the underlying managers and report back to the Board and the shareholders on the Trust’s new strategy.

The first year has delivered an encouragingly positive performance, in spite of the growing macroeconomic and political uncertainty that has seen volatility return to global equity markets. We’ve seen the Federal Reserve hike US interest rates three times, fears emerge over the impact of trade war between China and the US, and closer to home, UK economic data deteriorate in the face of uncertainty over Brexit.

Set against this backdrop, we are especially pleased to report that the Trust has hit its outperformance goal in its first year, and is on track to meet its target over a three year period. It provided an equity portfolio return of 5.7% in the last 12 months – more than double the 2.8% total returns of the MSCI ACWI.

This has contributed to the Trust delivering strong total shareholder and net asset value returns in the year, which stand at 3.9% and 4.9% respectively. At the same time, costs have been well managed, keeping the ongoing charges below the target of 0.65%.

Last, but by no means least, the Trust continues to deliver on the progressive dividend policy. It has raised its ordinary dividend for 2017 by 3%, as compared to 2016, the 51st consecutive year it has increased dividends. In raising dividends for over half a century, it is in the select company of just two other investment trusts in the UK.5


After a transformational year for both the Trust and its shareholders, the future looks bright.

Demand for investment trusts is growing. The Association of Investment Companies (AIC) reported that adviser purchases of investment companies on platforms rose 46% last year. The global sector was the most popular, accounting for 17% of all purchases.6

As volatility returns to markets, a cloud hangs over the UK’s economic growth, and sector-specific threats emerge, the appeal of global diversity is increasing as investors and their advisers seek to hedge their bets.

Alliance Trust is well positioned to meet this growing demand. The geographical and sector diversification of its equity portfolio, the mixture of different styles from its chosen equity managers, and its commitment to high conviction investing, will help investors navigate the vagaries of the stock market, and drive long-term returns.

As its new approach becomes more familiar with investors, and we build a longer track-record of outperformance, we believe it will go from strength to strength.


Recently the Alliance Trust Investment Committee met to discuss the new investment approach and its first full year perfromance results.

A transcription of the above video can be found here.



1. As rated by Willis Towers Watson

2. Antti Petajisto, Active Share and Mutual Fund Performance, 2013. Rick Di Mascio and Malcolm Smith, Identifying real skill and behavioural biases in the active management industry, 2005. Hao Jiang, Marno Verbeek, and Yu Wang, Information Content When Mutual Funds Deviate from Benchmarks, 2013

3. As rated by Willis Towers Watson

4. The Towers Watson Global Equity Focus Fund (a Sub-Fund of the Towers Watson Common Contractual Fund) was created by way of a Scheme of Amalgamation with the Towers Watson Global Equity Focus Fund (a Sub-Fund of Towers Watson Investment Management Ireland 1 plc) on 21 March 2017. Performance is shown from the inception of the Towers Watson Global Equity Focus Fund (a Sub-Fund of Towers Watson Investment Management Ireland 1 plc) on 17 August 2015 to 20 March 2017 for Z Share Series (USD), sourced from BNY Mellon Fund Services (Ireland) Limited. From 21 March 2017, performance shown is for Non-Treaty USD Z Units of the Towers Watson Global Equity Focus Fund (a Sub-Fund of the Towers Watson Common Contractual Fund), sourced from Northern Trust International Fund Administration Services (Ireland) Limited. The Z Share Series and Z Units do not bear TWIM (Towers Watson Investment Management) management fees. Fee paying “A” Units bear management fees of 25bps.

5. https://www.theaic.co.uk/aic/news/press-releases/aic-dividend-heroes

6. https://www.theaic.co.uk/aic/news/press-releases/2017-a-record-year-with-adviser-purchases-of-investment-companies-close-to-



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