An American hedge fund has suffered an initial defeat as it looks to take on seven UK-based investment trusts, with over 99 per cent of votes by other shareholders going against them.
Boaz Weinstein’s Saba Capital, which has stakes of up to £1.5bn invested across the seven trusts and is the largest individual shareholder in each, has called upon the remaining six trusts to “support Saba’s resolutions” to get them back on the “path to meaningful value creation.”
The seven funds involved are Baillie Gifford US Growth, CQS Natural Resources Growth and Income, Edinburgh Worldwide Investment, European Smaller Companies, Henderson Opportunities, Keystone Positive Change and Herald Investment.
Herald was the first to hold a vote on Thursday and almost 65 per cent rejected the plans by Saba, report the Telegraph.
Investment trusts in the UK offer people a chance to invest in, or own a portion of, multiple companies or other asset types, often (but not always) by grouping them together in themes such as geographic region, industry or asset class.
They are useful for smaller investors to gain exposure to different markets and to spread risk, when compared to buying shares in individual companies. However, because trusts are run by a fund manager there are usually higher fees involved - with the expectation effectively being that paying someone to run a trust (to make the decisions on what to buy and sell and when) means greater returns on investments can be achieved.
Many investment trusts can be bought on the stock market by anybody with a sharedealing account on a share trading platform, meaning ordinary savers and investors can have access to investing in worldwide companies - even inside a tax-free wrapper such as an ISA.
The fund manager who makes the investment decisions for the trust is typically overseen by a board.
An initial letter from Saba criticised the existing boards of those seven trusts for “failing to hold the investment managers accountable” for their “inability to deliver sufficient shareholder returns” and demanded shareholder votes to replace board members and install two new faces on each of the seven. Weinstein himself said there had been “shockingly poor performance in certain trusts” over a period of time.
In the face of the vote to dismiss Saba’s intentions, Herald chairman Andrew Joy reacted by saying: “Today non-Saba shareholders have almost unanimously rejected Saba’s self-interested proposals.
“The fact that 99.78 per cent of all votes cast by non-Saba shareholders were voted against Saba’s resolutions and in favour of the existing Board provides a clear, complete and incontrovertible rebuttal of Saba’s attempt to take control of your company and change its strategy against the wishes and interests of its non-Saba shareholders.”
A Saba statement responded by calling on the next trusts to take the opportunity to call for improvement.
“We appreciate the thoughtful engagement from fellow [Herald] shareholders in recent weeks, which only reinforces the dire state of the UK investment trust industry and need for Saba’s presence in the market [...] Saba remains committed to putting shareholders’ interests first, delivering returns for UK trust investors and ultimately rehabilitating this broken sector,” said a spokesperson.
“We urge shareholders of the six other trusts at which we have requisitioned general meetings to support Saba’s resolutions in order to set these trusts on the path to meaningful value creation.”
This article was written by Karl Matchett from The Independent and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.