Shareholder activism tends to follow predictable rhythms. A trust underperforms. A discount widens. A hedge fund with a taste for confrontation spots an opportunity.
Edinburgh Worldwide Investment Trust [LON:EWIT] finds itself in precisely this predicament, though with one twist. Its leading agitator, hedge fund Saba Capital, is not merely pushing for incremental change; it wants the entire board removed.
Saba’s open letter of November 27th, declaring its intention to requisition a general meeting to oust EWIT’s directors, lands at an awkward moment. The trust has spent the past year loudly proclaiming its “reset”, a comprehensive overhaul designed to sharpen performance, streamline the portfolio and narrow the discount. A meeting to discuss those efforts with Saba was already on the calendar. The activist did not wait.
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Boards often insist progress is being made; occasionally, they are right. EWIT’s numbers at least give the directors something to point to. Since the reset announced in late 2024, the trust has delivered a net asset value return of 16.8 per cent over one year, comfortably ahead of the S&P Global Small Cap Index’s 6.2 per cent.
The discount to NAV has been squeezed to just 4.4 per cent, compared with a peer-group average of 10.8 per cent. And the portfolio, still a mix of the speculative and the futuristic, has been rebalanced towards more profitable, cash-generative companies. SpaceX remains the top holding; PsiQuantum and Alnylam Pharmaceuticals add private-market zest.
Saba has an iron grip on the shares
Such improvements rarely deter determined activists. Saba’s grip on 30 per cent of the shares has emboldened it; EWIT’s board believes the hedge fund’s goal is outright control without paying a premium. It is not the first attempt. A February 2025 proposal by Saba to seize control was crushed by 98.4 per cent of non-Saba votes. Hedge funds have been known to sulk less.
The board’s counterattack hinges on its proposed merger with Baillie Gifford US Growth Trust (USA), a tie-up it claims would fast-track scale, cut costs and offer all shareholders, including Saba, a cash exit for up to 40 per cent of shares at a narrow discount to NAV. In other words: if Saba wants liquidity, here it is. If it wants influence, join the enlarged vehicle. If it wants control, forget it.
Saba’s response was brisk: no. Its stance suggests little interest in compromise. Without its vote, the merger dies. For the board, this is more than a tactical roadblock. It is a test of governance legitimacy. One large shareholder is holding veto power over a transaction the board argues benefits the other 70 per cent.
Baillie Gifford’s willingness to waive management fees to ease the merger’s costs shows how seriously it takes the threat. But the economics are not the only issue. Mergers of investment trusts are delicate affairs; private holdings complicate valuations; cash exit options can trigger selling pressure. That the board has secured “substantive agreement” with USA’s board already reflects the urgency it feels.
The Armchair Trader View
Saba may be overplaying its hand. Investment-trust activists succeed when other shareholders quietly agree with them. Here, they have already delivered a resounding rebuke. And if the merger genuinely enhances liquidity and reduces costs, the constituency in favour could be broader than Saba expects.
Still, EWIT’s board has work to do. Governance theatrics will distract from its investment thesis just as performance is beginning to improve. The directors must persuade shareholders that Saba’s ambitions are misaligned with the trust’s long-term interests. And they must do so quickly; activism rarely slows once underway.
For investors, the choice is less ideological than practical: back a board with improving performance metrics and a sensible, if complicated, consolidation plan, or back a hedge fund intent on a more drastic reconfiguration. The next few months will determine whether EWIT integrates, resets again, or fractures entirely.
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