US hedge fund Elliot Advisors has built a 5 per cent stake in the £655m British Empire Trust via derivative contracts.
In an stock exchange announcement, the hedge fund, which called for reforms on corporate governance and performance of Alliance Trust, said the exposure to British Empire is held through contracts of difference worth £32.5m.
British Empire’s NAV has risen by 16.3 per cent versus 15.1 per cent of the FTSE World index since portfolio manager Joe Bauernfreund replaced John Penninck on the trust in October 2015, after 13 years at its helm.
However, the trust has returned 8 per cent versus the AIC Global sector average of 40 per cent over the past five years, according to FE.
A note from broker Numis said: “The pressure is now on the managers of British Empire to deliver strong NAV performance and to narrow the discount in order to provide an exit for Elliott.
“Whilst the stake is currently small, there is clearly a threat that Elliott could add to its holding if the discount remains in double-digits.”
Elliot Advisors currently manages $27bn in assets and remains Alliance Trust’s largest shareholder with a 16 per cent stake.