Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

One of the most notable new additions to Fidelity’s list of best-selling investment trusts is the Alliance Trust, which has made it into the top ten for each of the first five months of the year. It has a unique mandate as it invests in the highest conviction stock picks from a range of leading investment managers.

Unique mandate

Alliance Trust aims to deliver a real return over the long-term through a combination of capital growth and a rising dividend. In order to do this its investment manager, WTW, has appointed 10 experienced stock pickers with different styles, who each buy a small number of their highest conviction positions.

If everything goes to plan, the highly focused stock selection could increase the potential outperformance, while the use of different managers could reduce the risk and volatility. There is obviously no guarantee, although the track record is positive.

WTW keeps the managers under constant review and changes them whenever necessary. It can also alter the allocation and will often trim the exposure to the winners and top up the laggards, which partly explains the 43% turnover during 2023.

Portfolio and outlook

The portfolio is split between 10 carefully selected equity managers - referred to as ‘stock pickers’ who each run a concentrated portfolio of 10-20 of their best stock ideas, although GQG Partners is more diversified with its emerging markets mandate containing around 50 holdings. They follow a variety of different styles from quality growth to contrarian value.

At the end of April there were a total of 215 different companies with the largest positions including well-known names such as Alphabet, Microsoft, Amazon and Visa. The key geographic exposure was the US at 57.8%, followed by Asia and the Emerging Markets at 18.8%, with the three main sector weightings being Information Technology, Financials and Industrials.

Alliance Trust - top 10 holdings

  1. Alphabet
  2. Microsoft
  3. Amazon
  4. Visa
  5. UnitedHealth Group
  6. Diageo
  7. Mastercard
  8. Nvidia
  9. Petrobas
  10. Novo Nordisk

Source: Alliance Trust factsheet, April 2024

Writing in the accounts, the manager said that they are excited about the prospects for the portfolio, as macroeconomic headwinds lead to higher dispersion between valuations, which skilled stock pickers can exploit.

Performance

In the year to the end of December, the trust made an NAV total return of 21.6% compared to 15.3% for the MSCI AC World Index, with the outperformance mainly driven by stock selection. The longer term record is also impressive.

Since the appointment of WTW in April 2017, Alliance Trust has generated a total shareholder return of 106.4%, which was well ahead of the 91% increase in the index. However, it is important to be aware that the discreet annual returns have been quite variable. Past performance is not a reliable indicator of future returns.

How much income does it pay?

Alliance Trust has a modest yield of just over 2%, yet it is one of the Association of Investment Companies’ Dividend Heroes that has successfully increased its annual dividend for 57 consecutive years. Please note this yield is not guaranteed.

Discount and buybacks

The shares are currently available at a 5% discount to net asset value (NAV). This is similar to the level they traded at throughout 2023, due in part to the Board’s active programme of buybacks.

How do the costs stack up?

The latest available ongoing charges figure is 0.62%, which seems like good value given that the multi-manager approach can sometimes be quite expensive with the double layer of fees.

A popular alternative

Alliance Trust is designed to provide a simple, high-quality way to invest in global equities at a competitive cost. The £3.4bn fund is similar to another popular option, F&C, which we recently covered in more detail here.

More on Alliance Trust

(%)
As at 17 June
2019-2020 2020-2021 2021-2022 2022-2023 2023-2024
Alliance Trust 2.6 26.8 -7.3 16.3 20.4

Past performance is not a reliable indicator of future returns.
Source: FE, share price total returns from 17.6.19 to 17.6.24. Excludes initial charge.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Shares in the trust are listed on the London Stock Exchange and their price is affected by supply and demand. The trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.

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