ACTIVIST investor Laxey Partners has demanded Alliance Trust use capital gains to triple its dividend payout, prompting the Dundee investment giant to retort that the rebel's proposal "makes Greek finances look prudent".

Isle of Man-based Laxey said Alliance could pay larger dividends when new tax rules come into force in April allowing some investment trusts to pay realised capital gains as dividends.

In a letter to outgoing chairwoman Lesley Knox, the hedge fund said if Alliance Trust distributed all 2011 earnings and realised capital gains "shareholders could receive a dividend of as much as 28p per share".

This is triple last year's 9p payout. It said this could be boosted further by paying out accumulated capital gains.

However, a trust spokesman said: "The example given by Laxey makes Greek finances look prudent."

He added that Alliance Trust increased its dividend for last year by 7%, the biggest rise in two decades.

Earlier this month, Laxey put forward a resolution to be discussed at Alliance Trust's annual shareholder meeting on April 27, demanding that it consider outsourcing the management of its £2.9 billion portfolio.

Last year Laxey failed to force the trust to buy back shares to narrow the discount between its share price and the value of the underlying investments.