STAR investment fund managers attract the kind of pay packets normally associated with Premier League footballers.
But with their multimillion pound salaries comes intense scrutiny if they miss an open goal.
And at the 120th annual meeting of FTSE 100 company Alliance Trust last month in its home town of Dundee, shareholders had their chance to speak out on the indifferent performance of one recent big-name signing – 40-year-old chief investment officer Katherine ‘the Great’ Garrett-Cox, formerly of Hill Samuel, Aberdeen Asset Management, Morley and one of the few women in the past decade (Nicola Horlick apart) to make a mark in the maledominated fund management industry.
It was an opportunity some shareholders were not prepared to miss. One investor speaking to Financial Mail on his way into the meeting summed up his concerns: ‘The reason I’m coming today? Because they are paying someone [Garrett-Cox] £1 million a year, but the trust’s performance has gone down since she joined last May and I want to know why. That salary may not be a lot by London standards, but it is a fortune up here.’ Over the past 12 months since Garrett-Cox joined, shareholders have seen losses of 8.6 per cent compared with a seven per cent loss for the benchmark FTSE World index. The trust’s discount to net asset value, a benchmark of investor sentiment, is languishing at 18.6 per cent – more than twice that of the average trust.
There are other disgruntled investors.
Errol Burchill, a retired stockbroker from Glasgow, is a regular at Alliance’s agms. Shares in Alliance have been owned by members of four generations of his family for 75 years.
Like many shareholders, Errol, 66, is a loyal trust supporter and wants to be comfortable holding the investment for many more years to come.
But he told the meeting: ‘We’re extremely disappointed by recent investment performance and are appalled to see these huge bonuses and huge salary increases for directors. Their remuneration is rising far more quickly than inflation.’ Another shareholder, concerned by rising management expenses at Alliance, told the agm: ‘These sums of money are taking us into footballer territory. But I ask – are we getting a Ronaldo-type performance for our money?’ Garrett-Cox, mother of four children, made the headlines last year when she switched from her role as chief investment officer at Morley, Aviva’s fund management business, to do the same job at Alliance.
The ‘transfer deal’ raised eyebrows. She left a London company managing assets of £160 billion and moved to Dundee, the historic home of 120-year-old Alliance, to control a mere £2.3 billion of funds.
She also arrived with a welcoming salary of more than £1 million, thanks to Alliance compensating her for a loss of bonuses she had earned at Morley – dramatically breaking pay records at a trust until then legendary for its rigid cost controls.
Garrett-Cox earned the nickname Katherine the Great as a hugely succ- essful US fund manager at Hill Samuel in the Nineties.
She then joined Aberdeen Asset Management as chief investment officer and took a seat on the board before moving in 2004 to Morley. Observers marvelled at her ability to juggle family life with the pressures of succeeding in the City.
But in signing for her new team, Garrett- Cox has inherited a tough brief. Over the past five years, Alliance has dramatically lagged behind its rivals, with shares delivering total returns of 56 per cent against 128 per cent for the average trust in the global growth sector. A LLIANCE did not have the investment expertise inhouse to capitalise fully on opportunities in emerging markets such as eastern Europe and Latin America and it was slow to see the potential of investing in commercial property.
Garrett-Cox is overseeing a revamp of the trust’s investment processes, recruiting new managers and investing in better systems.
Clearly, it will take time for these changes to bear fruit, but so far she has not delivered. And shareholders, as shown at the agm, are beginning to show their impatience.
Not that Alliance chairman Lesley Knox seems concerned at accusations of fat cat pay for indifferent fund performance. At the annual meeting, she told investors that much of Garrett-Cox’s bumper salary last year was paid to compensate for bonuses lost when she left Morley.
She said: ‘In the long term we want to be paying our executives a salary at the market median. We are below that level at the moment.’
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