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Alliance Trust makes Garrett-Cox redundant
Katherine Garrett-Cox, one of a small band of women to make it to the top of fund management, is axed as Alliance Trust seeks to cut costs.
(Update) Katherine Garrett-Cox’s links to Alliance Trust (ATST ), the investment trust she ran until last October, have been severed after her position as chief executive of its fund management business was abolished.
In a statement the Dundee-based investment company said that Garrett-Cox would step down as chief executive of its Alliance Trust Investments subsidiary next month with her job split between two men.
Operational responsibilities for ATI, which reported a £3.2 million loss before tax in 2014, will pass to Ramsay Urquhart, a director who will step up into a new role of managing director, while oversight of investments will go to Peter Michaelis, head of equities.
Garrett-Cox’s departure comes four months after she was forced to step down as chief executive of Alliance Trust after the board made sweeping changes to improve shareholder returns and to cut costs following a clash with the company's largest shareholder, Elliott Advisors.
Garrett-Cox earned £1.4 million in pay last year and under the terms of her contract could receive as much again for loss of office, although the precise payout will depend on the valuation of her long-term share incentive scheme. Her comparatively high total remuneration was controversial with shareholders, although she claimed it received undue attention because she was a woman.
Charles Cade, investment trust analyst at Numis Securities, said her position had looked vulnerable following the board room changes in the autumn. ‘We assumed that her pay structure would have needed to change to reflect the different responsibilities, but a highly paid CEO still appeared to be a luxury for a loss-making asset management business,’ he said
Lord Smith, Alliance Trust’s new chairman, said: ‘Alliance Trust is now moving swiftly to implement the changes announced last year which are designed to enhance shareholder returns. This process is well underway and it is clear to us all that the role of chief executive of Alliance Trust Investments has changed significantly.
‘I and the rest of the board wish Katherine every success in the future,’ he added.
Garrett-Cox said it had been an honour to work for Alliance Trust shareholders. ‘I leave Alliance Trust Investments with a strong team who are already delivering improved investment returns and driving down costs.’
The axing of her job ends a nine-year stint at Alliance Trust for Garrett-Cox, who, as the former chief executive of FTSE 250 investment company, was one of a small band of women to achieve a senior position in fund management.
Garrett-Cox joined Alliance Trust in 2007 as chief investment officer, having performed similar roles at Morley Fund Management, the investment arm of Aviva, the insurer, and before that at Aberdeen Asset Management.
She became chief executive of the £2.4 billion investment trust the following year but despite several shake-ups of the investment team failed to improve the global fund’s performance.
The beginning of the end came a year ago when Elliott Advisors, an aggressive US hedge fund which had built up a 13% stake in the shares, called for the appointment of two new non-executive directors to strengthen the board and improve its oversight of Garrett-Cox and her executive team.
Alliance initially opposed Elliott but, after a fierce exchange of words the board was forced into a humiliating U-turn before last year’s annual general meeting, when it became clear shareholders backed the appointments.
The arrival of the new directors ushered in a complete overhaul of the main board, culminating in last October’s shake-up when the executive directors, including Garrett-Cox were removed.
ATI was this month re-confirmed as Alliance Trust’s investment manager but its position is insecure as it can be replaced on six months’ notice.
Michaelis and Simon Clements, the portfolio manager, had improved returns since taking on Alliance in September 2014 and moving it towards their style of socially responsible and sustainable investment. However, the shares have suffered in the recent stock market rout, down nearly 12% this year, which is worse than the 9% decline in the FTSE All Share.
Meanwhile the discount – or gap – between the share price and the fund’s net asset value has widened to over 10%, despite concerted share buy-backs by the trust in the past four months.
In the background Elliott has tightened its grip by raising its stake to 15% in Alliance Trust. Analysts think it will push Alliance to make a tender offer to shareholders this year so it can sell its holding at a profit.
If ATI were to lose the Alliance Trust mandate it would be left with just £2 billion of third party assets under its management, mostly in its Sustainable Future fund range. According to Numis Securities it earns an average annual fee from this business of 0.46%, which is higher than the 0.35% imposed on it by Alliance Trust in October.
At the time Alliance Trust said it would cut £6 million costs from ATI so the subsidiary could reach monthly profitability by the end of this year. Annual results on 4 March will provide investors with an update on this with the shareholder annual general meeting following on 6 May.
In a rising market Alliance Trust shares rose 1.8% or 8.5p to just over 465p.
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