NOT one of the fund houses earmarked to take over management of Dundee’s Alliance Trust is based in Scotland, with the board planning to split its £3.5 billion of assets between individual managers located in London, Canada and the US.

At the end of last year Alliance Trust chairman Lord Smith of Kelvin unveiled plans to transfer the trust’s assets to up to nine managers, marking the culmination of a long-running campaign for change led by US activist investor Elliott Advisors.

The trust has now revealed that managers from London fund houses Jupiter, River and Mercantile and Veritas as well as Black Creek in Toronto, and First Pacific, Lyrical and Sustainable Growth Advisers in the US will each take responsibility for running a portfolio of 20 stocks. In addition, Rajiv Jain of emerging markets start-up GQG Partners will invest in up to 70 stocks, with the higher number designed to iron out some of the volatility exposure to emerging markets can bring.

The managers have been hand-picked by investment group Willis Towers Watson (WTW), which will have overall responsibility for overseeing the individual managers’ performance.

Stuart Gray, senior investment consultant at WGW, said that while the group “knows a lot of Scottish managers well” it decided to go with the managers it felt were best placed to run “concentrated portfolios”. He added that the intention is to keep manager turnover to a minimum, with the expectation that one could be changed per year.

Clare Dobie, a non-executive director who joined Alliance Trust’s board last year, added: “On another occasion a Scottish manager might make it into the selection. They haven’t on this occasion.

“The managers have to be ready to run 20-stock portfolios - a manager might be brilliant, but brilliant at running 100-stock portfolios.”

However, Jason Hollands, managing director of wealth manager Tilney Bestinvest, pointed out that because WTW has gone for so many overseas managers it will be difficult for investors in the UK to make a call as to whether they will be able to do a good job or not.

“River and Mercantile’s Hugh Sergeant and Jupiter’s Ben Whitmore are managers with very strong track records but most of the others in the list are not familiar names as they are based overseas and work for firms that don’t run funds that are normally available to UK retail investors,” he said.

“UK-based investors and advisers therefore have little line of sight to enable them to cast their own judgement on the quality of these teams and instead will have to place their faith that consulting firm Willis Towers Watson have done a thorough job in selecting these managers.”

That said, Mr Hollands noted that the changes “should not be interpreted as a snub to Scotland or its asset management sector”.

“Willis Towers Watson is a firm with global reach and the fact that they have cast their net widely rather than narrowly close to home should be considered a positive,” he said.

The proposed changes to Alliance Trust’s management, which shareholders will vote on at the end of February, have come after a turbulent couple of years in which hedge fund Elliott used the influence its large shareholding gave it to oust former chief executive Katherine Garrett-Cox and have two directors of its choosing appointed to the board.

The trust also saw off a takeover bid from RIT Capital Partners.

According to Ms Dobie the new management approach should appease the trust’s critics, with the board “really confident” that the changes will bolster its performance.

“We think the structure is far more likely to produce consistent outperformance because it is multi-manager and the managers are managing bespoke portfolios for Alliance Trust,” she added.

As part of the changes Alliance Trust Investments (ATI), which is wholly owned by Alliance Trust and also currently manages its investments out of Edinburgh and London, is being sold to Liontrust Asset Management in a £30 million deal. Liontrust has not yet confirmed whether it will retain ATI’s Scottish presence.

Elliott, which after Alliance Trust Savings is the trust’s largest shareholder with a position of 19 per cent, declined to comment on the proposed fund managers.