Alliance Trust’s new chairman Baron Smith of Kelvin has highlighted the importance of the £3.2billion company’s Scottish roots and of restoring its investment reputation.

The 71-year-old, who has said he will not cut back his boardroom commitments despite a suspected heart attack last August, comes fresh from his key role in the Scottish political settlement and from the £362,000 a year chair at SSE. He will join Alliance at a similar fee on February 1 in addition to chairing the Green Investment Bank, Forth Ports, and the quoted FT-250 engineering group IMI.

He succeeds Karin Forseke, who stepped down this month following a year which saw New York hedge fund and 15per cent shareholder Elliott Advisers defy her opposition to land two nominated directors onto the Alliance board.

That was followed three months ago by a radical overhaul, scrapping the chief executive role and board post held by high-profile leader Katherine Garrett-Cox, and giving her investment subsidiary a mandate to hit performance targets or lose the management of the trust.

Lord Smith’s best-known moment in his investment career was when, as newly-appointed chief executive of Morgan Grenfell Asset Management nine years ago, he suspended another ‘superwoman’, Nicola Horlick, for a suspected plot to jump ship with colleagues.

He said yesterday: “Alliance Trust is an important business with a long and proud history in Scotland and around the world. I am looking forward to getting started and playing my part in delivering the changes that are necessary to return the trust to the levels of performance upon which it has earned its reputation and success.”

The performance has improved, under managers appointed 17 months ago, while the boardroom shake-up has already seen the trust buy back 4.5per cent of its shares, driving down a historically high discount which reflected investor discontent.

The board will still have to deal with the 15per cent holding of Elliott Advisers, which has agitated for a tender offer to be made for shares, a move which could potentially see the trust shrink by up to a third if other investors decided to exit.

Lord Smith, however, has a track record of defending the Scottish base of his companies, notably in 2007 when as Weir Group chairman he directed it towards an offer by entrepreneur Jim McColl to buy Weir Pumps rather than a Swiss bid.

Alliance Trust said: “Between 1996 and 2002 Lord Smith was chief executive and then vice chairman of Morgan Grenfell Asset Management (latterly Deutsche Asset Management), at the time the largest pension fund manager in the UK and the leading asset manager in Germany. This direct knowledge of investment management was particularly attractive to the board, as was his previous experience of private equity investing, where he began his career in finance.”

Lord Smith added: “I am particularly pleased to be working with Gregor Stewart as my deputy chairman and Karl Sternberg as the senior independent director.”

Mr Stewart, former finance director at Scottish Widows and interim chairman, said: “The board has been working hard on implementing the plans announced on 1st October 2015, which include creating separate boards for our savings platform and investment management subsidiaries. The board’s focus is on investment performance, on creating natural demand for our shares and on reducing the trust’s discount.”

Alan Brierley, analyst at Canaccord Genuity, said: “We’ve seen a lot of sensible moves in recent months. These have put the Alliance on more solid footing, although at some point the board will have to address the Elliott shareholding.”

Ewan Lovett-Turner at Numis Securities said it was “positive to get in fresh blood to chair the board” and significant that Lord Smith had already referred to investment performance. The most recent annual figures showed a 6.3% advance for the trust versus 2.1% for its new world index.

The analyst said the changes in the trust’s structure and governance meant that was “a realistic possibility that third party managers could be appointed in future”.

Lord Smith,who is chancellor at Strathclyde University and chaired the organising committee for the 2014 Commonwealth Games, received his knighthood in 1999 for his work with the national museums, becoming an independent peer in 2008.