Leading investor research group ISS has thrown its weight behind Elliott Advisors in the activist's challenge to the governance and strategy of Alliance Trust.

ISS, in a heavyweight 17-page analysis that could be damaging to Alliance, says the Dundee-based company's figures on performance and costs are masking serious underperformance in both.

It also takes aim at the remuneration of chief executive Katherine Garrett-Cox, whose rewards are said to be double those at Jupiter and 20 per cent more than at Henderson, groups which manage six and 13 times more assets respectively than does Alliance.

ISS says the largest trusts in the global sector, the more meaningful peer group for Alliance, "have significantly outperformed the sector in all time periods, and Alliance has underperformed them by a significant margin" - for instance by 35 per cent over the past three calendar years.

The trust's discount had narrowed from 15.8per cent to 12per cent - but the global sector's discount had halved to 5per cent in the same period.

The report says Alliance has invested a cumulative £100m in its two subsidiaries, which arguably could have returned it £8.5m a year had it been invested in the trust's portfolio - a "huge number" when set against Alliance's £20.8m a year operating costs.

"By creating subsidiaries, Alliance has created a (mostly fixed) cost structure of £46.6 m," ISS says. That represented 0.97per cent of all its assets under management (the £3bn trust plus £2bn in Alliance Trust Investments). "For a trust the size of Alliance like Scottish Mortgage the charge is only 0.5per cent."

Backing the proposed election of three new directors to the board, ISS says: "Either the board has failed to challenge the status quo, or failed to adequately explain why the status quo is preferable. In either event, it seems clear that change is warranted at Alliance."