I’m a shareholder in Alliance Trust. Its subsidiary, Alliance Trust Savings, is home to my (substantial) SIPP. The service from ATS is simple, cheap and exemplary, and I’d recommend it. I wouldn’t recommend the shares to anyone until the management can persuade me they know what they’re doing.

Reading this week’s interim statement does not fill me with confidence.The tone is upbeat, and it is true that in the six months to the end of July, the company’s in-house fund managers mostly beat their benchmarks, if only by a modest margin. Measured by the net assets per share (NAV), coming in 16th out of a field of 34 is described as “progress”, which it is, compared to 20th place last year.

Since that time, the Alliance bosses have had a terrible shock. A resolution forced onto the agenda at the annual meeting demanded a discount control mechanism, and drew a large minority of supporters (including me) from Alliance’s supposedly docile shareholders. As they saw this approaching, the Alliance directors had something of a panic attack. They scrapped the long-standing policy of letting the market decide the company’s share price, and started buying stock to narrow the discount.

And how. Barely a day goes by without another purchase announcement. Since February, the capital has shrunk from 661m to 611m shares. Sometimes the volume figures indicate that Alliance is almost the only buyer. So what has this expenditure of the best part of £200m achieved? Not much, is the short answer. The discount to NAV has narrowed, but only from 17.1% to 15.6% in the six months to end-July. It’s just under 15% now, despite the purchase of nearly 8% of the outstanding shares. At this rate, Alliance would need to spend twice as much again to squeeze the discount down below 10%, as demanded by the failed resolution.

Alliance does not help itself when the ceo claims to have anticipated the market slump and sold shares from the portfolio, because the proceeds mostly went into its own shares, even when the price was hitting an all-time high in July. This hardly looks like clever market timing. One reinvestment, in Lloyds Banking Group, was a mistake. Its price has fallen by a third since then.

I’m on two investment trust boards, both of which have commitments to manage their shares’ discount to NAV. It takes time to convince the traders that a trust really will be there buying if the discount threatens to widen, as often happens in a bear market. It’s a long and sometimes painful process, not a quick fix. Once the market is convinced, the selling pressure abates, and few further purchases are necessary to keep to the mark, but Alliance is miles away from that happy state. Still, ATS is a cracking business from the customer’s point of view. Let’s hope Alliance can eventually make some money out of it.

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