US hedge fund Saba Capital has published an open letter to the shareholders of seven investment trusts. The letter calls for shareholders to vote on the suitability of the trusts’ current boards of directors, which Saba believes have not adequately held their investment trust managers to account over the wide share price discounts seen in recent months or shareholder returns.
The seven trusts for which Saba has requisitioned general meetings are:
Saba’s proposing significant changes to these investment trusts. They’re looking to replace the trusts’ independent boards of directors with two Saba representatives for each trust. They’ve also announced their intention to serve notice on the current investment managers of each trust, which gives them the opportunity to hire new managers who are more aligned with their views, potentially Saba themselves.
This could lead to a change in the trusts’ investment mandates, including investment philosophy and process, asset class exposure, risk level and fee structure. Investors should consider whether the investment trust would still meet their investment needs if it were under new management, and the investment mandate changed.
Of the seven trusts, two are under the coverage of the Research Team at HL- Baillie Gifford US Growth Trust and Edinburgh Worldwide Investment Trust. We provide independent analysis on these two trusts below. However, if you invest in any of the seven trusts on the HL platform you can vote on the resolutions proposed by Saba Capital through our website using the voting process described below.
This information isn’t personal advice. We can’t advise on which way you should vote. If you’re unsure what to do, please seek advice. All investments can fall as well as rise in value, so you could get back less than you invested.
What have the current boards of the investment trusts said?
Every trust that has been requisitioned has asked their shareholders to vote against all of Saba’s resolutions.
Many have pointed to their long-term performance record rather than focussing on the short term, and in some cases have reminded investors of the board’s commitment to buy back shares when the share price discount to the net asset value has widened.
They’ve also reiterated that it’s vital the trusts’ board of directors remain independent. They say independent boards are essential to maintain high standards of governance and act in the best interests of all shareholders. Replacing the board of directors and investment managers with Saba representatives removes that independence and there’s no guarantee they’ll act in the interest of all shareholders.
Premium/Discount
Most of the investment trusts in question have traded on hefty discounts (the difference between the share price of the trust and the value of the underlying assets) over the last few years. These have narrowed more recently though, and some are now trading on small premiums.
Current Premium/Discount | 3 year average | 5 year average | 10 year average | |
|---|---|---|---|---|
Baillie Gifford US Growth Trust | 0.69% | -14.00% | -7.38% | N/A |
CQS Natural Resources Growth & Income | -2.88% | -12.67% | -13.72% | -14.85% |
Edinburgh Worldwide Investment Trust | 0.36% | -12.61% | -7.24% | -5.75% |
Henderson Opportunities Trust | 0.09% | -12.13% | -12.61% | 12.48% |
Herald Investment Trust | -2.13% | -14.47% | -13.74% | -15.41% |
Keystone Positive Change Investment Trust | -5.37% | -11.91% | -10.53% | -10.21% |
The European Smaller Companies Trust | -5.39% | -12.37% | -12.58% | -11.23% |
Performance
Saba has presented three-year performance numbers in its communications regarding the requisitions. While this shouldn’t be overlooked, it’s important investors also consider long-term performance, and whether both shorter- and longer-term performance is in-keeping with where the trust invests and its investment style. We have presented three-year, five-year and ten-year (where applicable) numbers below.
3, 5 and 10 year performance
31/12/2021 To 31/12/2024 | 31/12/2019 To 31/12/2024 | 31/12/2014 To 31/12/2024 | |
|---|---|---|---|
Baillie Gifford US Growth Trust | -9.92% | 100.36% | n/a |
S&P 500 | 39.83% | 108.40% | 326.46% |
CQS Natural Resources Growth & Income | 33.82% | 168.10% | 198.69% |
AIC Investment Trust - Commodities & Natural Resources | 15.79% | 126.66% | 132.86% |
Edinburgh Worldwide Investment Trust | -33.47% | -1.27% | 148.51% |
MSCI AC World Small Cap | 12.24% | 49.45% | 162.29% |
Henderson Opportunities Trust | -8.47% | 21.89% | 87.48% |
FTSE All-Share | 18.39% | 26.23% | 81.26% |
Herald Investment Trust | -2.99% | 64.19% | 268.74% |
Russell 2000 Technology | 9.01% | 73.86% | 309.23% |
Keystone Positive Change Investment Trust | -20.19% | -24.61% | -12.84% |
MSCI AC World | 28.59% | 74.90% | 216.72% |
The European Smaller Companies Trust | 5.33% | 63.05% | 235.02% |
MSCI Europe ex UK Small Cap | -7.14% | 29.35% | 149.62% |
5 year performance
31/12/2019 To 31/12/2020 | 31/12/2020 To 31/12/2021 | 31/12/2021 To 31/12/2022 | 31/12/2022 To 31/12/2023 | 31/12/2023 To 31/12/2024 | |
|---|---|---|---|---|---|
Baillie Gifford US Growth Trust | 133.45% | -4.73% | -52.80% | 22.31% | 56.04% |
S&P 500 | 14.74% | 29.89% | -7.79% | 19.16% | 27.26% |
CQS Natural Resources Growth & Income | 53.82% | 30.25% | 30.17% | -11.95% | 16.76% |
AIC Investment Trust - Commodities & Natural Resources | 50.41% | 30.14% | 8.24% | -1.27% | 8.36% |
Edinburgh Worldwide Investment Trust | 87.72% | -20.95% | -39.76% | -10.90% | 23.95% |
MSCI AC World Small Cap | 13.22% | 17.61% | -7.98% | 10.79% | 10.08% |
Henderson Opportunities Trust | 16.80% | 14.01% | -23.30% | -1.05% | 20.59% |
FTSE All-Share | -9.85% | 18.27% | 0.29% | 7.87% | 9.43% |
Herald Investment Trust | 51.69% | 11.58% | -28.86% | 7.86% | 26.43% |
Russell 2000 Technology | 38.42% | 15.22% | -28.03% | 20.36% | 25.85% |
Keystone Positive Change Investment Trust | -0.82% | -4.76% | -33.55% | 9.44% | 9.75% |
MSCI AC World | 13.22% | 20.14% | -7.62% | 15.88% | 20.13% |
The European Smaller Companies Trust | 36.45% | 13.45% | -14.67% | 14.04% | 8.24% |
MSCI Europe ex UK Small Cap | 18.64% | 17.42% | -15.47% | 11.07% | -1.10% |
Voting
At HL we believe that voting is key for shareholders to ensure the companies in which they invest are managed in line with their interests. All shareholders should consider the available information carefully and come to their own conclusions on how to vote. Given that these proposals have the potential to change the way the trusts are managed, we would encourage all investors to exercise their vote.
Timetable of when the general meetings will take place
Investment trust | General meeting date | Deadline for Voting on the HL Platform |
|---|---|---|
Baillie Gifford US Growth Trust | 3 February 2025 | 7pm 29 January 2025 |
CQS Natural Resources Growth & Income | 4 February 2025 | 7pm 30 January 2025 |
Edinburgh Worldwide Investment Trust | To be announced | tbc |
Henderson Opportunities Trust | 4 February 2025 | 7pm 29 January 2025 |
Herald Investment Trust | 22 January 2025 | 7pm 17 January 2025 |
Keystone Positive Change Investment Trust | 3 February 2025 | 7pm 28 January 2025 |
The European Smaller Companies Trust | 5 February 2025 | 7pm 30 January 2025 |
How to give an instruction
Log in to your HL account using our website. It’s not possible to give instructions via the HL app
Select ‘View shareholder meetings’
View your shareholder meetings and provide an instruction
You’ll be taken to a website managed by a third party called Broadridge to complete your instruction. HL is not responsible for the content on this website.
Full details on how to vote can be found on the AGMs and Shareholder Voting section of our website.
Baillie Gifford US Growth Trust
This trust allows investors to get exposure to some of the best growth companies in the US. This includes up-and-coming private companies which the trust’s managers believe will become some of the largest companies in the world such as SpaceX, Stripe and Epic Games. Investing in these companies is higher risk.
Since the trust launched in March 2018 to the end of December 2024, the share price is up 172.77%*, outperforming the 127.25% gain for the average trust in the AIC North America sector. During this time, the trust’s Net Asset Value (NAV) has risen by 184.05%. Past performance is not a guide to future returns.
This trust has been volatile though, as can often be the case for a long-term, high-growth portfolio with exposure to private companies. The trust was a huge beneficiary of the low-interest rate environment brought on by the Covid pandemic in 2020. It also gained from investing in companies that benefited from the change in consumer behaviours, such as remote working. Over this period the trust performed extremely well as businesses such as Zoom and Shopify saw huge increases in demand.
However, the trust suffered as its high-growth style of investing went out of favour in 2022. This also impacted other trusts and funds using a similar investing style. It fell in value as interest rates rose to combat rising inflation. Higher interest rates are typically a headwind for growth companies as they’re more reliant on borrowing to fund their growth. Investors were also less willing to pay the higher valuations for these companies as their future growth was being eroded by higher interest payments and inflation.
More recently, interest rates have peaked and begun to fall, as has inflation, and the trust has performed much better.
The board has been active in buying back shares to close the discount. Since November 2023, the board has bought back 18.45 million shares, representing 6.1% of the trust, in an attempt to lower the discount, and it’s now trading close to NAV.
Edinburgh Worldwide Investment Trust
The trust gives investors exposure to early-stage growth companies as they aim to become more established. This includes investments in private companies that are yet to be publicly listed on the stock market, such as SpaceX. Investing in these companies is higher risk.
The board has also been active in buying back shares. From October 2022 to October 2023 they bought back just over 5 million shares.
Since the current management team took over the trust in January 2014 to the end of December 2024, the share price has risen by 141.45%*, compared to 188.08% for the MSCI AC World Small Cap index. However, the trust has performed much better than the average trust in the AIC Global Smaller Companies sector which has returned 44.60%. During this time, the trust’s Net Asset Value (NAV) has also risen by 122.13%. Past performance is not a guide to future returns.
Like many trusts that use a growth style of investing, performance in 2020 was extremely strong. They were beneficiaries of the low-interest rate environment during the Covid pandemic. Given the trust invests in smaller companies that are more reliant on borrowing to fund future growth this was beneficial for many companies in the trust.
However, the opposite was true in 2022 when interest rates began to rise to combat inflation. Not only did the trust’s growth style of investing go out of favour but so did smaller companies. Investors turned to larger companies where growth and earnings was more predictable.
More recently the trust has performed well. The majority of the returns came towards the end of the year as smaller companies in the US rebounded strongly off the back of the US election. The trust invests around 70% in US companies. A win for Donald Trump was seen as market friendly as he pledged to focus on protecting US businesses through tariffs as well as lowering taxes for both consumers and businesses.