DUNDEE-based Alliance Trust has fallen into the bottom half of its peer group after exposure to the United States and some poor stock selection weighed on it during last year's stock market surge.
The trust has been overhauled by chief executive Katherine Garrett-Cox over the past few years, who called a halt to its experiment in private equity and property investing and recruited Ilario Di Bon from Fidelity to boost its global equities investing.
But Alliance Trust's total Net Asset Value (NAV) return of 18.4% for 2013, a measure of its investment performance, placed it in the third quartile of global investment trusts despite being its best result for three years.
As the discount between its share price and the underlying portfolio narrowed, its total share price return was 22.7%, which ranked it median in its peer group over the year.
Ms Garrett-Cox insisted: "It is a very strong record."
She added: "What I would say is that, for the moment, the NAV is not necessarily going to keep pace with the sector average. The peer group is extremely eclectic.
She added: "There will be periods of time where we do not match the performance."
A bias towards US investments dragged on the trust on the second half of the year while stock selection was poor in areas such as healthcare and information technology. Ms Garrett-Cox added that many of the stocks that have done well are in cyclical sectors such as "dirty industrials" while the trust prefers quality stocks
She added that over three years the trust's performance is "very definitely in the second quartile".
Ms Garrett-Cox also noted that its equity portfolio, which accounted for 94% of assets, returned 21.6% over the year, slightly ahead of the MSCI World Index at 21.1%.
She highlighted the total dividend of the year of 10.83p, up 12.5% on 2012 after it announced a fourth interim dividend of 2.387p and a special dividend of 1.282 to be paid on June 30.
This is the trust's 47th consecutive year of dividend increase, funded in part by mineral rights in the US dating back to its roots as a mortgage bank lending to American farmers.
Stephen Peters, analyst at Charles Stanley, said: "Performance is much improved from what it was. But the industry is a very competitive one,"
Ms Garrett-Cox is positive about the prospects for equities with 98% of net assets now invested in the asset class.
But she is worried about the impact of an uncontrolled credit bubble in China.
"That is something we are keeping a very beady eye on," she said.
Of its subsidiaries, Alliance Trust Savings made its first full year profit in eight years while Alliance Trust Investments won an institutional mandate for the socially responsible investment team it hired from Aviva in 2012. The two businesses remain valued at just £26.7 million and £10.1m respectively on the books of a company with net assets of £2.8bn.
Ms Garrett-Cox revealed that it has established London-based companies for the units to give it "options" in the event of Scottish independence.
As it exits its property investments, Alliance Trust sold 107 George Street, Edinburgh for £5m. It also cut the value of Monteith House on Glasgow's George Square by £400,000 to £4.5m.
Ms Garrett-Cox played down the importance of hedge fund Elliott International upping its stake from 5% to 10% of Alliance Trust.
"They have benefited from the improvement in the discount. We engage with them as we do other investors," she said.
Two years ago the trust was targeted by another hedge fund Laxey Partners although shareholders rejected its reform plans.
She said that Alliance Trust had added around 40 people to its Dundee workforce in the last few months to take its Scottish headcount to 230 with another 30 people in London.