Not only was 1888 the year Jack the Ripper began his murderous spree across London and the Football League was founded, it also marked the incorporation of Alliance Trust.
The trust we see today is very different from its 19th-century form, not least because day-to-day management of the £2.5bn portfolio was taken on by Willis Towers Watson, the investment consultants, in April 2017 in a drastic change of strategy.
Willis Towers Watson’s Mark Davis, co-manager of the trust, tells Telegraph Money how he chooses the world’s best money managers and what was learned from the £40m sale of ill-fated spin-off Alliance Trust Savings (ATS) to Interactive Investor.
Alliance Trust provides exposure to global stocks through a collective of proven stock pickers at a low cost. We are striving for strong capital growth, with growth in dividends too. The dividend has been raised for 52 years and there’s a commitment to that continuing.
Willis Towers Watson is the investment manager for the trust. Our job is to scour the world and find the best stock pickers we can. We have eight proven stock pickers and we ask them to pick 10 to 20 of their best stocks and not worry about risk control within their choices.
We pick managers with different approaches that complement each other. That’s how we control risk.
Our experience and research show that no fund manager has 50 great ideas at any one time. They probably have 20 good ideas and then buy other companies to limit risk.
Since we took over we haven’t made a change by removing a manager, but we have made changes to the portfolio and to the weightings between the managers.
We don’t think it’s right to be chopping and changing regularly. Our line-up would change only if there were a fundamental change with the manager, such as a key person leaving or the firm being merged or sold. Those things could lead us to change our view but they don’t happen every month.
The cost to investors is 0.65pc a year, which we think is very competitive. The underlying managers get a fee based on the size of the assets they manage, then there’s a fee to Willis Towers Watson and other operating costs.
We are able to keep the fee low because of our negotiating power. We are one of the largest advisers to institutional investors and can use that scale to negotiate the best possible rates with the managers. We make sure investors benefit.
The latest accounts also show the results of a review by the board. There were some assets that weren’t central to the trust’s strategy. One was ATS, which is being sold.
The trust’s focus is now purely on being a global equities trust and nothing else. That simplification is one of the reasons for the board review, which has also seen directors’ salaries reduced. The board wanted the trust to get that focus back. After the review it has found what it thinks is a good home for ATS.
We have been through a very strong cycle where managers focused on growth have typically outperformed while managers who focus on value – buying out-of-favour assets and waiting for their price to increase – have underperformed.
One of the most recent changes we made was to take some profits from some of the technology-focused growth managers and move the money to the “deep-value” managers who have seen some underperformance.
When I look at the portfolios of those value managers now, they look quite attractive as they are able to buy good-quality businesses for low prices.
It’s still early days for the new approach. Since its inception we have outperformed our peers by 1.6 percentage points. We had a very strong year in 2017. Last year was challenging for many fund managers, including the trust’s. What gives us confidence that we will achieve our objectives is our long track record with institutional investors.
There are two elements. Almost all the managers own equity in their own businesses and invest in the stocks in their portfolios. Then there are four of us on the trust’s investment committee and we all invest in the trust.
I would have loved to be a professional golfer but I don’t think my swing could have lived up to it. I was a mathematician as I loved understanding how things actually worked. That led to investing, but it could also have led me to a career in engineering.
Think of any electronic product and the chances are it will use a chip manufactured by Microchip. Its chips are the brains that drive thousands of products across the automotive, industrial, consumer, aerospace, defence and data centre markets.
Automotive sensors, avionics, digital clocks, refrigerators, smart thermostats, smoke detectors, surveillance cameras, touchscreen pads – you name it, its chips run them.
We bought shares in Microchip in November 2018 on the belief that they had been oversold. The timing was opportune as the price has gone up by 25pc.
Andrew Wellington, Lyrical Asset Management