portfolio update april 2020 - alliance trust€¦ · alliance trust equity portfolio returns are...
TRANSCRIPT
CRAIG BAKERGLOBAL CIO, WILLIS TOWERS WATSON
PORTFOLIO UPDATE
APRIL 2020
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
STUART GRAYCO-PORTFOLIO MANAGER, WILLIS TOWERS WATSON
W I L L I S T O W E R S W A T S O N I N V E S T M E N T T E A M
2
Source: Willis Towers Watson. As at 31 December 2019.
STUART GRAYCo-Portfolio Manager
Investment Committee Member
CRAIG BAKERGlobal CIO
Chair of Investment Committee
MARK DAVISCo-Portfolio Manager
Investment Committee Member
Global Research AssociatesOperations and Support
Associates
Portfolio Management Team
Associates
109 219 21
Years of Investment Experience
25 16 21 21
MARIA MUSIELASenior Client Lead
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
REVIEW OF 2019
2 0 1 9 : K E Y M E S S A G E S
• Alliance Trust outperformed in 2019, despite headwinds for active managers; portfolio also
ahead of benchmark and peers since Willis Towers Watson became investment manager
in April 2017
• Share price discount to Net Asset Value (NAV) reduced to -4.1% at year-end from -4.9% at
end of 2018
• Buybacks reduced again over 2019
• Business simplification completed; remaining disciplined on costs
• Well positioned to be a core holding for all generations of investors
• Dividend increased by 3% to 13.96p, the 53rd consecutive annual rise
4
Source: Willis Towers Watson, February 2020.
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
D I V I D E N D I N C R E A S E D F O R 5 3 R D C O N S E C U T I V E Y E A R
5
Source: Willis Towers Watson, Alliance Trust, DPS: Dividend per share
▪ Fourth interim dividend of 3.49p per share, bringing total for the year to 13.96p, a 3% increase on 2018
▪ The 53rd consecutive annual increase
▪ Revenue reserves of £109.2m, more than 2x 2019’s pay-out, to increase by an additional £645.3m if conversion
of merger reserve is approved by shareholders and court
0
2
4
6
8
10
12
14
16
18
20
0
5,000
10,000
15,000
20,000
25,000
1968 1973 1978 1983 1988 1993 1998 2003 2008 2012 2017
Div
iden
d p
er
sh
are
(p
)
DPS (p) - rhs Capital Return Total Return
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
Past performance is not a reliable indicator of future returns.
6
P E R F O R M A N C E S U M M A R Y
Past performance is not a reliable indicator of future returns.Sources: Investment Performance data is provided by BNY Mellon Performance & Risk Analytics Europe Limited, Morningstar and MSCI Inc.
Notes: All data is provided as at 31 December 2019. Figures may be subject to rounding differences. The benchmark shown is the MSCI All Country World Index Net Dividends Reinvested. NAV Total Return figures are based
on NAV including income with debt at fair value. Alliance Trust equity portfolio returns are before fees. Peer Group Source: Morningstar. The peer group is the Morningstar universe of UK retail global equity funds (open ended
and closed ended) with performance net of fees. P.a. outperformance calculated arithmetically.
24.3% 23.1% 22.9% 21.7% 22.4%
5%
10%
15%
20%
25%
30%
35%
Total ShareholderReturn
NAV Total Return Equity PortfolioTotal Return(before fees)
MSCI ACWI Peer Group Median
Pe
rfo
rma
nc
e
Alliance Trust Benchmark Peer Group
Performance from 1 January 2019 to 31 December 2019
Pro-forma NAV
Total Return
≈
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
7
P E R F O R M A N C E S U M M A R Y
28.9% 27.1% 29.2%25.5% 24.4%
5%
10%
15%
20%
25%
30%
35%
Total ShareholderReturn
NAV Total Return Equity PortfolioTotal Return(before fees)
MSCI ACWI Peer Group Median
Pe
rfo
rma
nc
e
Alliance Trust Benchmark Peer Group
Performance from 1 April 2017 to 31 December 2019
Pro-forma NAV
Total Return
≈
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
Past performance is not a reliable indicator of future returns.Sources: Investment Performance data is provided by BNY Mellon Performance & Risk Analytics Europe Limited, Morningstar and MSCI Inc.
Notes: All data is provided as at 31 December 2019. Figures may be subject to rounding differences. The benchmark shown is the MSCI ACWI Net Dividends Reinvested. NAV Total Return figures are based on NAV including
income with debt at fair value. Alliance Trust equity portfolio returns are before fees. Peer Group Source: Morningstar. The peer group is the Morningstar universe of UK retail global equity funds (open ended and closed ended)
with performance net of fees. P.a. outperformance calculated arithmetically..
UPDATE FOR 2020 CORONAVIRUS CRIS IS
9
W T W R E A C T I O N T O C O R O N A V I R U S
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
• All colleagues currently working from home
• Regular client updates on performance and portfolio positioning
• Additional investment due diligence on the managers’ portfolios to understand how they are re-
underwriting each of their holdings to reflect balance sheet strength and future opportunities
• Additional separate operational due diligence on managers to test their business operational issues and
resilience, and Business Continuity Planning effectiveness
✓ All systems working and optimised for critical functions
✓ Additional protocols implemented to provide equipment to support
working from home
✓ Protocols established to build virtual communities, enhance team
communications, and assist colleagues with flexible arrangement
✓ In the event of any public health concern that may potentially lead to a
high rate of colleague absence, WTW will focus available resources
on business processes that directly support client needs.
10
Q 1 2 0 2 0 M A R K E T O V E R V I E W
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
0
20
40
60
80
100
Apr 2019 Jun 2019 Aug 2019 Oct 2019 Dec 2019 Feb 2020
Crude Oil Falls and Volatility Spikes
CBOE Volatility IndexNY Mercantile Futures - Crude Oil May 2020
-60
-50
-40
-30
-20
-10
0
0 100 200 300 400 500 600 700 800 900
Dra
wdow
n (
%)
Months
S&P 500 Drawdowns Through History
1973 1980 1987 2000 2007 2020
Past performance is not a reliable indicator of future returns.Source: S&P, CBOE, NY Mercantile Exchange, Willis Towers Watson, Data as of 31 March 2020.
2020
1987
11 © 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
M A R K E T D R I V E R S F I R S T Q U A R T E R 2 0 2 0
-30%
-25%
-20%
-15%
-10%
-5%
0%
Small Cap Mid Cap Large Cap
Size Performance Q1 2020
MSCI ACWI
-25%
-20%
-15%
-10%
-5%
0%
Value Growth Quality Momentum
Style Performance Q1 2020
MSCI ACWI
-30%
-25%
-20%
-15%
-10%
-5%
0%
NorthAmerica
Europe exUK
UK Japan Pacific exJapan
EmergingMarkets
Regional Performance Q1 2020
MSCI ACWI
-45%
-30%
-15%
0%
Sector Performance Q1 2020
MSCI ACWI
Past performance is not a reliable indicator of future returns.Source: MSCI, GBP Total Returns, Unhedged. As at 31 March 2020.
A C T I V E M A N A G E M E N T H A S F A C E D H E A D W I N D S O V E R T H E L A S T D E C A D E , P A R T I C U L A R L Y I N 2 0 1 8 , 2 0 1 9 A N D Q 1 2 0 2 0
12
Past performance is not a reliable indicator of future returns.Source: Factset, as at 31 March 2020 MSCI World Price Return (USD) index
2011 2012 2013 2014 2015 2016 2017 2018 2019 Q1 2020
MEDIAN STOCK
RETURN-9.8% 12.5% 22.8% 1.1% -2.7% 4.1% 19.0% -15.0% 20.5% -25.8%
INDEX RETURN -7.6% 13.2% 24.1% 2.9% -2.7% 5.3% 20.1% -10.4% 25.2% -21.4%
ACTIVE
HEADWIND2.2% 0.7% 1.3% 1.8% -0.1% 1.2% 1.1% 4.6% 4.7% 4.4%
This is just for single quarter!
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
13 © 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
M A R K E T D R I V E R S S I N C E W T W A P P O I N T M E N T
-8%
-4%
0%
4%
8%
NorthAmerica
Europeex UK
UK Japan Pacific exJapan
EmergingMarkets
Regional Performance since 01.04.17
MSCI ACWI
-6%
-4%
-2%
0%
2%
4%
Small Cap Mid Cap Large Cap
Size Performance since 01.04.17
MSCI ACWI
-4%
-2%
0%
2%
4%
6%
8%
10%
Value Growth Quality Momentum
Style Performance since 01.04.17MSCI ACWI
-15%
-10%
-5%
0%
5%
10%
15%
20% Sector Performance since 01.04.17
MSCI ACWI
Past performance is not a reliable indicator of future returns.Source: MSCI, GBP Total Returns, Unhedged. As at 31 March 2020.
14 © 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
Past performance is not a reliable indicator of future returns.Source: MSCI, GBP Total Returns, Unhedged. As at 31 March 2020.
G R O W I N G D I V I D E B E T W E E N S T Y L E A N D S I Z E F A C T O R S
-22%
-30%
-25%-24%
-19%
-25%
-19%
-12%-10%
-15%
-5%
8%
-7%-9%
5%
29%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
1 Month 3 Months 1 Year 3 Years
MSCI ACWI Small Cap Value MSCI ACWI Small Cap MSCI ACWI Large Cap MSCI ACWI Large Cap Growth
15
P E R F O R M A N C E S U M M A R Y
Performance to 31 March 2020
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
Past performance is not a reliable indicator of future returns.Sources: Investment Performance data is provided by BNY Mellon Performance & Risk Analytics Europe Limited, Morningstar and MSCI Inc.
Notes: All data is provided as at 31 March 2020. Figures may be subject to rounding differences. The benchmarks shown are the MSCI ACWI Net Dividends Reinvested and the MSCI ACWI Equal Weight Net Dividends
Reinvested in GBP. NAV Total Return figures are based on NAV including income with debt at fair value. Alliance Trust equity portfolio returns are before fees.
-14.0%
-10.9%
-13.3% -13.7%-14.6%
-12.0%
-14.6%
-19.4%
-16.0%
-18.7%
-23.1%
-20.9%
-17.6%
-20.6%
4.2%5.5%
-7.2%
-0.9%
0.6%
6.1%
-7.9%
-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
EquityPortfolioTotal
Return
MSCI ACWI MSCI ACWIEqual
WeightedIndex
TotalShareholder
Return
NAV TotalReturn
MSCI ACWI10% Levered
MSCI ACWIEqual
Weighted 10%Levered
1 Month 3 Months Since WTW appointment
16
P E R F O R M A N C E S U M M A R Y
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
Past performance is not a reliable indicator of future returns.Sources: Investment Performance data is provided by BNY Mellon Performance & Risk Analytics Europe Limited, Morningstar and MSCI Inc.
Notes: All data is provided as at 31 March 2020. Figures may be subject to rounding differences. The benchmark shown is the MSCI ACWI Net Dividends Reinvested. NAV Total Return figures are based on NAV including
income with debt at fair value. Alliance Trust equity portfolio returns are before fees. The passive alternative iShares is the BlackRock iShares MSCI ACWI ETF. Peer Group Source: Morningstar. The peer group is the
Morningstar universe of UK retail global equity funds (open ended and closed ended) with performance net of fees. P.a. outperformance calculated arithmetically.
-0.9%
0.6% 4.2%5.5%
-7.2%
5.2%3.3%
-5%
-3%
-1%
1%
3%
5%
7%
Total ShareholderReturn
NAV Total Return(net of all costs)
Equity PortfolioTotal Return(before fees)
MSCI ACWI MSCI ACWIEqual Weighted
Index
Passivealternative -iShares ETF
Peer GroupMedian
Pe
rfo
rma
nc
e
Alliance Trust Benchmark Peer Group
Performance from 1 April 2017 to 31 March 2020
D I V E R S I F I E D H I G H C O N V I C T I O N D E L I V E R S S M O O T H E R R I D E
17
Source: Investment Performance data is provided by BNY Mellon Performance & Risk Analytics Europe Limited, Morningstar and MSCI Inc. Individual manager and Alliance Trust returns are
benchmarked against MSCI All Country World Index NDR (Net Dividends Reinvested) except for the Emerging Markets manager that is benchmarked against the MSCI Emerging Markets NDR Index.
Alliance Trust equity portfolio returns are before fees. 101/04/17
Past performance is not a reliable indicator of future returns.
Relative cumulative performance from Willis Towers Watson’s appointment1 to 31 March 2020
Underlying manager returns vs. benchmark
Alliance Trust equity portfolio (combined) vs. MSCI ACWI
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
MSCI ACWI Large Cap Growth vs MSCI ACWI
MSCI ACWI Small Cap Value vs MSCI ACWI
-1.2%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Mar 19 Jun 19 Sep 19 Dec 19 Mar 20
Retu
rns r
ela
tive
to
MS
CI
18
K E Y A C T I O N S T A K E N I N T H E P O R T F O L I O D U R I N G Q 1
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
• Confirmed still comfortable with each of the managers in the portfolio
➢Operational due diligence
➢Challenge on robustness of the companies in their portfolios
➢Attribution of performance between fundamentals and multiple expansion/contraction
➢Challenge on the new opportunities being opened up
• Made minor tweaks to manager weightings
➢Primarily risk management
➢Some profit taking
• Minor increase in gearing levels following market falls
19
S T O C K C H A N G E S I N T H E P O R T F O L I O D U R I N G Q 1
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
• Stocks purchased
➢Valmet – a Finnish developer and supplier of technologies, automation systems and services
for the pulp, paper and energy industries
➢Heineken – a Dutch brewing company
➢ Iberdrola - a Spanish multinational electric utility company
➢Dell - an American multinational computer technology company
• Stocks sold
➢New Oriental – Chinese provider of private educational services
➢Nielsen - an American information, data and measurement firm
➢Citigroup - an American multinational investment bank and financial services corporation
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.
G E A R I N G L E V E L S S I N C E D E C E M B E R 2 0 1 9
20
Source: The Bank of New York Mellon, Willis Towers Watson. Data as at 31 March 2020
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
31/12/2019 14/01/2020 28/01/2020 11/02/2020 25/02/2020 10/03/2020 24/03/2020
Gross Gearing Net Gearing - Central Cash Net Gearing - All Cash
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
Market bottoms on the 23rd of March
A L L I A N C E T R U S T P O R T F O L I O X - R A Y
21
Past performance is not a reliable indicator of future returns. Source: Willis Towers Watson, March 2020. EPS: Earnings Per Share, ICB: Industry Classification Benchmark
As at 31 March 2020
Breakdown by industry (ICB) (%)
1 3
14 14
10
14
1 0
14
26
31
4 4
12 1113 12
3 4
19 19
0 00
5
10
15
20
25
30
Oil
& G
as
Basic
ma
teria
ls
Industr
ials
Co
nsum
er
go
ods
He
althcare
Co
nsum
er
serv
ices
Tele
com
m-
un
ication
s
Utilit
ies
Fin
ancia
ls
Techn
olo
gy
Ca
sh
Oth
er
Portfolioweight
Benchmarkweight
Breakdown by region (%)
53
1810
4 50 1
70 3 0
60
13
4 8 80 3 4
1 0 00
10
20
30
40
50
60
70
Nort
h A
meri
ca
Eu
rop
e e
x U
K(D
ev)
UK
Jap
an
Asia
Pa
cific
ex
Jap
an (
De
v)
Mid
dle
Ea
st
&A
fric
a (
Dev)
Ad
va
nce
dE
merg
ing
Se
co
nda
ryE
merg
ing
Non
-in
dex
cou
ntr
ies
Cash
& n
on
-e
qu
itie
s
Oth
er
Portfolio weight
Benchmark weight
Style tilt analysis (z-score)
-0.4
0.1
0.0
0.1 0.0 0.1
-0.1 -0.1 0.0
0.1 0.1
0.0 -0.1
-1.2
-0.7
-0.2
0.3
0.8
Siz
e
Retu
rn o
n in
veste
dcap
ital
Retu
rn o
n e
quity
Sa
les g
row
th
Ea
rnin
gs p
er
share
gro
wth
Long-t
erm
EP
S g
row
th
Div
idend / P
rice
Bo
ok / P
rice
Ea
rnin
gs / P
rice
Cash flo
w / P
rice
Sa
les / P
rice
Mo
mentu
m 1
Year
Mo
mentu
m 3
Month
Large
cap
High
quality
High
growth
Cheap Positive
momentum
Size Quality Growth Value Momentum
Net active weight by market cap size
Small Large
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
-8
-6
-4
-2
0
2
4
6
1 2 3 4 5 6 7 8 9 10
22
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. Past performance is not a reliable indicator of future returns.Source: Willis Towers Watson, March 2020.
Country of Listing United States United States China United States United States
Sector Communication
ServicesFinancials
Consumer
Discretionary
Information
Technology
Information
Technology
Number of stock
pickers5 2 2 1 2
Relative position
to the MSCI ACWI+2.4% +1.4% +1.4% +1.3% +1.3%
Country of Listing India United States China United Kingdom United States
Sector FinancialCommunication
Services
Communication
ServicesIndustrials Financials
Number of stock
pickers2 1 1 1 1
Relative position
to the MSCI ACWI+1.2% +1.2% +1.1% +1.0% +1.0%
T O P T E N R E L A T I V E H O L D I N G S A T E N D M A R C H 2 0 2 0
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S C E N A R I O S A N D F O R W A R D L O O K I N G R I S K M A N A G E M E N T
23 © 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
Assumptions and expected impacts
Global recovery in Q3 Extended global recession Credit squeeze and defaults
Epidemiology
▪ Public health policy
measures are highly
effective – virus spread
controlled by mid-Q2
▪ Social distancing
measures eased in c. 2
months
▪ Problem transmissions occur
up to Q3. Public health policy
is less effective; control of the
virus and social distancing
easing takes 4 months; with
new cluster cases in localised
areas
▪ Problem transmissions occur
up to Q3. Public health policy
is less effective
▪ New cluster cases continue in
localised waves through the
northern hemisphere winter
China
▪ Recovery in factory
output is largely
complete by early-to-mid
Q2; consumer
confidence recovers in
Q3
▪ Recovery in factory output is
delayed until Q3; consumer
confidence recovers only in
Q4
▪ Recovery in factory output is
delayed until Q3; consumer
confidence recovers only in
Q4
▪ Slower recovery in export
sectors
US and Europe
▪ US and Europe have an
acute contraction until
mid-to-late Q2
▪ Highly effective
government credit
support for households /
businesses
▪ SMEs are most affected;
service sectors (aviation,
travel, tourism) will be
significantly affected
▪ Energy sector affected
by lower oil price to Q3
▪ Global recession over Q1 to
Q3; US and Europe contract
significantly throughout Q2
and Q3
▪ Acute, sustained and broad-
based decline in corporate
earnings in 2020
▪ Large-scale government credit
support for households /
businesses
▪ Consumer confidence does
not recover until Q4
▪ US and Europe contract
through to Q1 2021
▪ A shock to employment,
incomes, and global trade
drives deleveraging given high
debt levels
▪ Company funding and credit
conditions are acutely affected
leading to defaults
▪ Policy is insufficient or
ineffective; economic recovery
is weak from Q2 2021
24
S U M M I N G U P
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
• Strong absolute and relative returns since WTW appointment to 31 December 2019 despite a significant
headwind against the strategy
➢ Majority of stocks in the benchmark have underperformed significantly
• Sharp declines in markets in Q1 2020 has led to poor absolute returns from a fully invested equity portfolio
➢ Slightly exacerbated for investment trusts given in-built leverage
• Relative return in Q1 2020 also negative
➢ Headwinds even stronger than in previous period
• Small changes made to the portfolio but in general we believe it remains very well placed to profit from any
likely reversal in market leadership
➢ The underlying managers are finding great companies at depressed prices
➢ They are comfortable with the balance sheet strength of their portfolios
➢ Apart from a bias away from mega cap companies we do not have any strong style biases in the portfolio
APPENDIX
A N A T T R A C T I V E P R O P O S I T I O N –D I V E R S I F I E D , H I G H C O N V I C T I O N
Focus on high-conviction
stocks; no passengers!
C O N V I C T I O N
High active share of
around 80% drives
outperformance
Blend of best-in-class1
managers with
complementary styles
R I S K
C O N T R O L
Manager diversification
reduces key man risk and
produces a smoother
return profile
High-quality managers
carefully selected by
Willis Towers Watson
from around the globe
E X C L U S I V E
A C C E S S
UK retail investors can
only access the
managers’ 10-20 best
stock picks through the
Trust
Alliance Trust has a
progressive dividend
policy
D I V I D E N D
G R O W T H
Alliance Trust is one of
only three investment
trusts to increase its
dividend every year for
53 years
Environmental, Social
and Governance factors
are embedded in the
investment process
S U S T A I N A B L E
Integrating responsible
investing should help
manage risk and deliver
better returns
Past performance is not a reliable indicator of future returns.
Ongoing charges ratio
target of 0.65% pa or
less2, proving highly
active management
doesn’t have to be
expensive
L O W C O S T
Leading to
higher expected returns
Source: Willis Towers Watson (WTW). 1Best-in-class refers to a Willis Towers Watson rating.2The Ongoing Charges Ratio target of 0.65% is based on NAV reported as at 31 December 2017
26 © 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
27
Source: Willis Towers Watson, February 2020.
N I N E O F T H E B E S T S T O C K - P I C K E R S F R O M A C R O S S T H E W O R L D W I T H D I V E R S E S T Y L E S 1
CANADA
UK
US
UK retail investors can only access these managers’ 10-20 best stock picks through the Trust
G R E G H E R R ,
P I E R R E P Y
First Pacific Advisors
Seeks companies with high-
quality business models, that
exhibit financial strength & strong
management
A N D R E W
W E L L I N G T O NLyrical Asset Management
Focus on businesses with
attractive capital returns and
the flexibility to react to all
phases of the business cycle
B E N
W H I T M O R E
Jupiter Asset Management
Seeks out-of-favour &
under-valued businesses
with prominent franchises
& sound balance sheets
A N D Y
H E A D L E Y
Veritas Asset Management
Thematic investing to identify
companies & industries that
are well positioned to benefit
medium-term growth
H U G H
S E R G E A N T
River & Mercantile Asset Management
Strength in smaller companies
& recovery situations
identifying value at different
stages of a company’s lifecycle
C . T
F I T Z P A T R I C K
Vulcan Value Partners
Focus on finding quality
businesses that have the
ability to compound in value
over the long term.
G E O R G E F R A I S E ,
R O B R O H N ,
G O R D O N M A R C H A N D
Sustainable Growth Advisers
Seeks companies that have strong
pricing power, recurring revenue
generation & long runways of growth
R A J I V J A I N
GQG Partners
Looks for high-quality &
sustainable businesses
whose strengths should
outweigh the macro
environment
A N D R E W
W E L L I N G T O N
Lyrical Asset Management
Focus on businesses with
attractive capital returns &
flexibility to react to all phases
of the business cycle
B I L L K A N K O
Black Creek Investment
Management
Value-orientated buyers of
leading businesses. Long-
term contrarian approach
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
H I G H C O N V I C T I O N A N D H I G H A C T I V E S H A R E D R I V E O U T P E R F O R M A N C E
28 © 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
Incre
asin
g o
utp
erf
orm
an
ce
Higher conviction portfolios
Ave
rag
e A
nn
ua
lise
d A
lpha
(%
)
-0.3 -0.3
-0.5
-0.1 -0.1
0.2
0.0
0.70.8
1.0
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1 (Lowest) 2 3 4 5 6 7 8 9 10(Highest)
Deciles of Active Risk
Own less of this
Own more of this
More stocks Fewer stocks
Past performance is not a reliable indicator of future returns.Source: Sebastian & Attaluri, Conviction in Equity Investing, The Journal of Portfolio Management, Summer 2014
29
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. Past performance is not a reliable indicator of future returns.
S T O C K L E V E L A T T R I B U T I O N Q 1 2 0 2 0
Name Country Sector
Active
Average
Weight
Annualised
Total Return in
Sterling
Performance
Attribution
Effect
TOP 5 CONTRIBUTORS
NVIDIA Corporation United States Information Technology 1.0% 20% 0.4%
Alphabet Inc United States Communication Services 2.6% -7% 0.2%
Ubisoft Entertainment SA France Communication Services 0.7% 14% 0.2%
Amazon.com Inc United States Consumer Discretionary 0.6% 13% 0.2%
Alibaba Group Holding China Consumer Discretionary 1.2% -2% 0.2%
TOP 5 DETRACTORS
Airbus SE France Industrials 1.4% -53% -0.6%
HDFC Bank Limited India Financials 1.3% -32% -0.3%
AerCap Holdings NV Netherlands Industrials 0.7% -60% -0.3%
Capita plc United Kingdom Information Technology 0.3% -80% -0.3%
CGG France Energy 0.3% -70% -0.3%
▪ Our holding in cash provided some cushioning over the period, however leverage had a negative
impact
Source: Willis Towers Watson, Factset, data as of 31 March 2020
Estimated attribution metrics calculated using the Brinson methodology using monthly data
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
30
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. Past performance is not a reliable indicator of future returns.
S T O C K L E V E L A T T R I B U T I O N 2 0 1 9
Source: Willis Towers Watson, Factset, data as of 31 December 2019
Estimated attribution metrics calculated using the Brinson methodology using monthly data
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
We aim to control for sector, country and style biases to ensure that portfolio risk and
performance is driven by our Stock Pickers stock selection. Our portfolio has an active share of
80%, with a Tracking Error of 2-4% p.a.
Name Country Sector
Active
Average
Weight
Annualised Total
Return in Sterling
Attribution
Effect
(Annualised)
TOP 5 CONTRIBUTORS
Qorvo, Inc. United States Information Technology 0.4% 84% 0.5%
New Oriental Education & Technology Group, China Consumer Discretionary 0.7% 113% 0.5%
Charter Communications, United States Communication Services 1.0% 64% 0.3%
Crown Holdings, Inc. United States Materials 0.9% 68% 0.3%
CGG France Energy 0.4% 136% 0.3%
TOP 5 DETRACTORS
Apple Inc. United States Information Technology -2.1% 81% -0.9%
Qurate Retail, Inc United States Consumer Discretionary 0.5% -58% -0.6%
Glanbia Plc United Kingdom Consumer Staples 0.5% -40% -0.4%
Baidu, Inc. China Communication Services 0.7% -23% -0.4%
Pearson PLC United Kingdom Communication Services 0.6% -31% -0.3%
31
C O S T S R E M A I N C O M P E T I T I V E
▪ Administrative expenses reduced to £5.9m from £6.5m in 2018, including reduction in Directors’
remuneration
▪ Ongoing Charges Ratio reduced to 0.64% in 2019 from 0.65% in 2018; KID charges (below) are competitive
0
0.5
1
1.5
2
2.5
3
3.5
4
(%)
Performance Fees Portfolio transaction costs Ongoing costs
The charges are shown for the AIC global equity sector investment companies. Data sourced by WTW from the latest investment company Key Information Documents (KIDs). As such cost
data may be as at different dates.
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
THANK YOU
I M P O R T A N T I N F O R M A T I O N A N D R I S K W A R N I N G S
33
This section contains important regulatory disclosures and risk warnings that are relevant to the material in this document. You should read this
section carefully, as it is intended to inform and protect you.
• The value of all investments and the income from them can go down as well as up. This means you could get back less than you invested.
• Past performance is not a reliable indicator of future returns.
• Alliance Trust may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value
(NAV) meaning that a relatively small movement, down or up, in the value of the Trust’s assets will result in a magnified movement, in the
same direction, of that NAV. This may mean that you could get back nothing at all.
• The Trust has underlying holdings which are denominated in currencies other than Sterling and therefore may be affected by movements in
exchange rates. Consequently, the value of these investments may rise or fall in line with exchange rates.
Calendar year performance 2015 2016 2017 2018 2019
Alliance Trust Equity Portfolio Return (%)1 6.1 23.3 17.9 -4.2 22.9
MSCI ACWI Total Return (%) 3.8 29.4 13.8 -3.3 21.7
Relative return (%) +2.3 -6.1 +4.1 -0.9 +1.2
Source: Willis Towers Watson, December 2019. 1Calculated before managers' fees and including the effect of the managers' cash holdings. In order to report the long-term record of the
equity portfolio, the returns of the portfolio prior to its restructure early in April 2017 have been combined with the returns to date of the current portfolio. MSCI ACWI Gross Dividends
Reinvested Total Return reported for the period 2015 to 2018 and MSCI ACWI Net Dividends Reinvested Total Return reported for 2019. Equity portfolio returns are as reported in the
Company’s December factsheets except for 2019 where the one-year performance was not disclosed.
Past performance is not a reliable indicator of future returns.
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
I M P O R T A N T I N F O R M A T I O N
34
• This financial promotion has been approved by Towers Watson Investment Management Limited (“TWIM"), authorised and regulated by the
Financial Conduct Authority. This presentation includes certain information and materials prepared for Alliance Trust PLC (the “Company”) by
TWIM. Unless stated specifically otherwise, this presentation is not a recommendation, offer or solicitation to buy or sell and any prices or
quotations contained herein are for information purposes only.
• This presentation has been prepared for general information purposes only and must not be relied upon in connection with any investment
decision. Under no circumstances should this presentation or any of the information contained within it be considered a substitute for specific
professional advice. Potential investors should seek independent financial advice from a financial adviser who is authorised under the Financial
Services and Markets Act 2000 before making any investment decision.
• This document contains certain forward‐looking statements with respect to the financial condition, results of operations and businesses and plans
of the Company and its subsidiaries (the “Group”). These statements and forecasts involve risk and uncertainty because they relate to events and
depend upon circumstances that have not yet occurred. There are a number of factors that could cause actual results or developments to differ
materially from those expressed or implied by these forward‐looking statements and forecasts. As a result, the Group’s actual future financial
condition, results of operations and business and plans may differ materially from the plans, goals and expectations expressed or implied by
these forward‐looking statements. The Company undertakes no obligation publicly to update or revise forward‐looking statements, except as may
be required by applicable law and regulation (including the Listing Rules of the Financial Conduct Authority). Nothing in this presentation should
be construed as a profit forecast or be relied upon as a guide to future performance.
• The presentation is based on information available to TWIM at the date of this material and takes no account of subsequent developments after
that date. In preparing this material TWIM has relied upon data supplied to it by third parties. Whilst reasonable care has been taken to gauge the
reliability of this data, TWIM provides no guarantee as to the accuracy or completeness of this data and TWIM and its affiliates and their
respective directors, officers and employees accept no responsibility and will not be liable for any errors or misrepresentations in the data made
by any third party.
• The entities within the Willis Towers Watson group responsible for the management of the Alliance Trust investment portfolio are Towers Watson
Investment Management (Ireland) Limited (TWIMI), Willis Towers Watson House, Elm Park, Merrion Road, Dublin, DO4 P231, register number
528835, authorised and regulated by the Central Bank of Ireland as the Alternative Investment Fund Mangers (AIFM), and Towers Watson
Investment Management Limited (TWIM), authorised and regulated by the Financial Conduct Authority (reference number 446740) as the
investment manager and a delegate of the AIFM.
© 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.
• In the absence of its express written agreement to the contrary neither the Company nor TWIM and its affiliates and their respective directors,
officers and employees accept any responsibility and will not be liable for any consequences howsoever arising from any use of or reliance on
this presentation.
• NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA,
JAPAN OR SOUTH AFRICA OR ANY JURISDICTION FOR WHICH THE SAME COULD BE UNLAWFUL. THE INFORMATION CONTAINED
HEREIN DOES NOT CONSTITUTE AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION, INCLUDING IN THE UNITED STATES,
CANADA, AUSTRALIA, JAPAN OR SOUTH AFRICA
• Whilst care has been taken in compiling the content of this presentation, no representation or warranty, express or implied, is made by Alliance
Trust as to its accuracy or completeness. Some slides may been compiled from external sources. Whilst these sources are believed to be
reliable, the information has not been independently verified and therefore no representation is made as to its accuracy or completeness.
• The opinions expressed are those held by Alliance Trust at date of issue and are subject to change. Examples used are to demonstrate our
investment philosophy and should not be interpreted as recommendations to buy or sell.
• Alliance Trust PLC is listed on the London Stock Exchange and is registered in Scotland No SC1731. Registered office, River Court, 5 West
Victoria Dock Road, Dundee, DD1 3JT. Alliance Trust PLC gives no financial or investment advice.
• The MSCI information is the exclusive property of MSCI Inc. (“MSCI”) and may not be reproduced or re-disseminated in any form or used to
create any financial products or indices without MSCI’s express prior written permission. This information is provided “as is” without any express
or implied warranties. In no event shall MSCI or any of its affiliates or information providers have any liability of any kind to any person or entity
arising from or related to this information. For the avoidance of doubt, please also note that TWIM and its affiliates and their respective directors,
officers and employees accepts no responsibility and will not be liable for any errors or misrepresentations in any MSCI information made
available hereunder.
I M P O R T A N T I N F O R M A T I O N
35 © 2020 Willis Towers Watson. All rights reserved. Proprietary and confidential.