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Laxey claims Alliance is 'terrified' of revealing its true costs

Activist investor Laxey Partners has stepped up its attack on  Alliance investment trust saying the cost of owning its shares has more than trebled in five years.

Laxey claims Alliance is 'terrified' of revealing its true costs

The cost of owning Alliance Trust shares has increased by 336% over the last five years according to Laxey Partners, the activist hedge fund challenging the investment trust's board.

Laxey, which owns 1.6% of Alliance shares, wants investors to force Alliance's management to adopt a discount control mechanism (DCM) that would stop Alliance shares falling more than 10% below their net asset value (NAV). If such a mechanism were successful Laxey and other investors could potentially see their holdings rise 7% as trust currently trades at a 17% discount.

Laxey has criticised Alliance Trust on several fronts including the voting rights of its managers, claiming that under some circumstances the management could have their votes geared up to 200 to 1.

The most recent criticism says that Alliance Trust has only revealed the total expense ratio (TER) of the company without its subsidiaries. It said that subsidiaries like Alliance Trust Savings, Alliance Trust Asset Management and Alliance Trust Finance all added to the cost of owning its shares.

In a statement Laxey, whose chief executive is Colin Kingsnorth (pictured), said: ‘We believe the real reason Alliance Trust has declined to adopt a DCM (discount control mechanism) is that the board is terrified of exposing the true total expense ratio to shareholder scrutiny In the light of continuing pedestrian performance.’

TER is the overall costs paid by investors for owning their investment and includes management charges and other expenses. Citywire has been told that rules set out by the Association of Investment Companies say that subsidiaries should not be included in TER calculations.

Alliance would not comment on Laxey’s criticisms but will write to investors tomorrow as part of its preparations for its annual general meeting in May.

Activist investor, Elliott International, has recently bought a 3% stake in Alliance Trust and stockborker Rensburg Sheppards has said it may use its 1.4% stake to back Laxey. There are estimated to be about 40,000 investors in the trust.

3 comments so far. Why not have your say?

Patrick Napier

Apr 11, 2011 at 22:02

"Alliance Savings" is very inefficient - no wonder it loses money. I have been waiting since December for my "Welcome Pack" but it still hasn't arrived. They don't answer emails or even ackowledge them. Has anybody belse had these problems?

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Apr 13, 2011 at 11:43

Alliance Savings is a low cost investment platform and I think well worth using. They even rebate commission that they receive back to the investor.

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Apr 15, 2011 at 09:02

I have found ATS very "efficient", but if anything is slightly out of the ordinary its down to you to sort it out.

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