UPDATE 2-Alliance Trust prepares first bond fund

Mon Apr 19, 2010 5:20am EDT

Related Topics

* Shifts equity exposure to Asia

* First corporate bond fund by early summer

(Recasts, adds further details, CEO comments)

By Cecilia Valente

LONDON, April 19 (Reuters) - Investment firm Alliance Trust (ATST.L) will launch its first fixed income product later this year and diversify equity exposure towards Asia while western growth appears fragile, its chief executive said on Monday.

Katherine Garrett-Cox told Reuters the FTSE 100 company will capitalise from investors' appetite for income products by launching a mainly UK-focused corporate bond fund in the next two to three months after hiring a team of four bond managers from Scottish Widows last year [ID:nLR513996].

The plans were announced as the 120 year-old Trust said total returns for the year to Jan. 31 stood at 22.2 percent, placing it 34th out of 43 investment companies in its global growth peer group after missing out on part of the equity market rally last year compared to its peers.

The FTSE All-World index returned 28.4 percent over the period.

Garrett-Cox declined to give a fund-raising target for the new product, which will target clients looking for income as they approach retirement.

Assets under management grew to 3 billion pounds ($4.81 billion) from 2.6 billion pounds at the end of the first half, and 2.1 billion at the end of last year. A small portion of that is in equity products sold through its asset management arm.

Alliance Trust has increased the equity exposure of the Trust to its highest level in eight years, at 95 percent from 77 percent at the same point last year, the difference made up largely of cash holdings.

"For now at least we think the strongest returns are from equity markets," said Garrett-Cox. "(But) we need to be very vigilant. There are a lot of unanswered questions, structural debt in Europe will be a real problem. I think we have the political agenda clouding certain things.

"Having said that, we still think the real growth will still come out of Asia," she said.

Alliance Trust is diversifying away from Western Economies, where Garrett-Cox sees a greater chance of double-dip recession.

The trust has cut exposure to the UK by about 5 percent and shifted the money to Asian markets, albeit through UK companies such as HSBC (HSBA.L) and Standard Chartered (STAN.L).

In the 12 months to end-March, the Trust had returned just over 33 percent, underperforming peers by 16.3 percentage points, according to Lipper data.

The company will pay total dividends for the full year of 8.15 pence against 8 pence the previous year.

At 0913 GMT the company was trading at 345 pence, marginally off Friday's close of 346.2 pence and mirroring the early start for the FTSE 100 .FTSE. ($1=.6233 Pound) (Editing by Joel Dimmock, Mike Nesbit)

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