Laxey

It says Laxey's proposals would introduce uncertainty over the use of its cash, potentially damaging investment planning or forcing portfolio investment sales at inopportune times to fund the buyback.

Test of Faith at Alliance Trust Hester Plumridge 2011

Laxey Partners wants Alliance Trust to adopt a mandatory buyback whenever the discount exceeds 10%, a strategy already adopted by a number of peers and listed hedge funds to help prevent sharp falls.

Test of Faith at Alliance Trust Hester Plumridge 2011

There have been hints that Laxey may make more proposals if the current move fails, including pressing the trust to consider contracting out its management to another investment group.

Alliance Trust under pressure to cut its discount 2011

Activist fund Laxey Partners, owners of a 1.4% stake, wants to impose an automatic share-buyback mechanism to help close a persistent 16% discount to net asset value.

Test of Faith at Alliance Trust Hester Plumridge 2011

Alliance Trust, one of the largest and oldest investment trusts, is under attack from activist investor Laxey Partners, which wants it to introduce measures to reduce and control its discount – the amount a share price falls below the value of its underlying assets.

Alliance Trust under pressure to cut its discount 2011

Katherine Garrett-Cox, Alliance's chief executive, rejected Laxey's proposals, saying improved performance is the key to cutting the discount.

Alliance Trust under pressure to cut its discount 2011

It has now fallen to 15.3% because of Laxey's attentions.

Alliance Trust under pressure to cut its discount 2011

Unfortunately, however, Laxey's proposals would also not in themselves improve the performance and could, in fact, be counterproductive.

Alliance Trust under pressure to cut its discount 2011

They could back Laxey merely as a protest, in the hope that the proposal will be voted down but win enough votes to make it clear there is a need for change.

Alliance Trust under pressure to cut its discount 2011

Laxey's request has already had some effect as Alliance Trust is already actively buying back shares.

Alliance Trust under pressure to cut its discount 2011