Katherine Garrett-Cox exits Alliance Trust after long battle with hedge fund

The Scottish firm is to dispense with the role of chief executive on her departure

Katherine Garrett-Cox could pocket a £1.4m pay-off after leaving Alliance Trust

Alliance Trust’s former chief executive, Katherine Garrett-Cox, is leaving the Scottish firm for good after she was made redundant from her role running its fund-management arm following a bruising battle with a Wall Street hedge fund.

Ms Garrett-Cox, one of the most high-profile fund managers of the past decade, will walk away with a handsome pay-off equivalent to a year’s pay – worth around £1.4m last year – when she leaves Alliance Trust Investments (ATI) on 11 March, and could get even more under a contract she signed on becoming chief executive in 2008.

Her role at ATI will be abolished after her departure. Ramsay Urquhart, a director of ATI, will become the most-senior operational boss at the group while the head of equities, Peter Michaelis, becomes the senior investment manager.

“I leave Alliance Trust Investments with a strong team who are already delivering improved investment returns and driving down costs,” Ms Garrett-Cox said.

Her exit follows a string of defeats inflicted by US activist shareholder Elliott Advisors, led by the hedge-fund tycoon Paul Singer, after it prevailed in a war to boot off directors sitting on the trust’s board last year.

The final nail in the coffin came with the exit of Karin Forseke, Alliance’s former chairman – and Ms Garrett-Cox’s closest ally – last year. She was replaced by the former banker Lord Smith of Kelvin, who took the chairman’s reins this month. He said the chief executive role at ATI had “changed significantly”.

“This won’t come as a huge shock to anyone,” Charles Cade, an analyst at Numis, said, adding that Ms Garrett-Cox’s departure was inevitable, given the trust is trying to shrink costs.

As part of the overhaul, the trust is trying to make £6m of savings by reducing the amount it pays in fees to ATI. Ms Garrett-Cox led Alliance Trust until October when she was bumped down to run ATI. The move came in the wake of a settlement with Elliott – which has a significant holding in ATI– in April 2015, to abolish executive positions at the listed entity.

The hedge fund had launched a raid by taking a large stake (now at 13 per cent) and requesting three board seats at Alliance.

A last-minute deal struck on the eve of an emergency meeting prevented the issue going to a shareholder vote.

The admission of Anthony Brooke and Rory Macnamara – Elliott’s nominees – on to the board in effect sealed Ms Garrett-Cox’s fate.

Alliance Trust, one of the world’s oldest investment trusts that was founded in Dundee in 1888, will now be comprised solely of non-executive directors.

It has a large and loyal armchair shareholders base, with nearly three out of every four shares owned by small-scale retail investors.

Ms Garrett-Cox proved a controversial figure at the trust due to her high salary and higher profile, despite presiding over a period of flagging performance at the group.

Despite losing to Elliott, she had successfully fought previous attempts to dethrone her, most notably in 2012 when activist investor Laxey Partners tried to shake up the group.

Laxey subsequently lost a shareholder vote on its plans to overhaul the board and Ms Garrett-Cox clung on.

Shares in FTSE 250 listed Alliance rose 2 per cent, or 9.1p to 465.8p in the wake of the announcement.

The trust has been buying back shares over the past few months to narrow the discount between the share price and net asset value of the fund, which measures the value of its funds.