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Investment trust investors urged to vote in Saba Capital raid

Investment trust investors urged to vote in Saba Capital raid

US-based hedge fund Saba Capital launched a stunning raid on UK investment trusts in December, pushing for wide-ranging governance changes at seven UK-listed trusts. The replacement of board directors would in turn potentially allow it to capture the investment management mandates on the trusts.

The proposals from Saba would fundamentally change these investment trusts. Initially Saba is proposing to replace the current independent boards with just two new directors. Saba has stated an intention to follow this with replacement of the investment manager and a completely new investment mandate.

The proposals would likely change the asset exposure, investment risk and return profile of the companies, moving them away from the original choice made by investors.

The seven investment trusts affected are:

  1. Baillie Gifford US Growth – 29 January voting deadline
  2. CQS Natural Resources Growth & Income
  3. Edinburgh Worldwide
  4. European Smaller Companies Trust
  5. Henderson Opportunities Trust – voting by 29 January (on AJ Bell) or 30 January (other platforms)
  6. Herald Investment Trust – voting by 17th January
  7. Keystone Positive Change – 29 January voting deadline

Saba Capital is likely banking on winning votes if the large number of retail investors in these investment trusts stay away from crucial decisions on their future. The first of the general meetings already scheduled is that of the Herald Investment Trust, for 22 January. Others follow in the first week of February. Edinburgh Worldwide had yet to announce its meeting date at time of writing.

“Saba is proposing major changes to these seven investment trusts so it’s essential that platforms notify their customers about these meetings swiftly and encourage them to vote,” said Richard Stone, CEO of the Association of Investment Companies (AIC) in London. “This is underlined by the Consumer Duty, which requires platforms to help their customers make informed decisions about their investments by ensuring they have the information they need at the right time, in a way they can understand.”

The AIC has provided further information on how investors in the affected trusts can vote on Saba’s proposals.

“It’s vital that shareholders vote on the future of their investment trust,” the AIC’s Stone added. “The final decision rests with them. They can also take the opportunity to attend the general meetings and ask questions.”

Keystone Positive Change: Saba is “acting opportunistically”

The board of Keystone Positive Change said it was “appalled by Saba’s actions and conduct” and believes that “its proposed resolutions would be highly detrimental to the interests of all other shareholders” and that the firm is “acting opportunistically”. It urged all shareholders to vote their shares and recommends that shareholders vote against all of the proposed requisitioned resolutions.

Following consultation with a range of shareholders, including Saba, Keystone’s board proposed a winding-up of the fund that will, if implemented, provide shareholders with the option to either: (a) realise their investment via an uncapped cash exit; or (b) roll over their investment into a similar open-ended fund, Baillie Gifford Positive Change Fund.

Despite the prior engagement, Saba has now stated its intention to block the Keystone board’s managed wind-down proposal. Keystone experts this to lead to “additional costs, unnecessary delay and considerable uncertainty for all shareholders”.


In justifying its blocking of the scheme, Saba has referred to concerns around the method for crystallising value from the fund’s private investments.  As of 30 November 2024 these only represented 2.6% of the portfolio. The Keystone board said it was disappointed that Saba appears to be using this as an excuse to oppose the scheme and is confident that the proposed orderly realisation is the optimum route to achieve best value for shareholders.

“Saba’s commitment to an optimal outcome for all shareholders via its requisitions should be questioned, in our view, and we tend to agree with the boards’ statements that the proposals do not appear to be in the best interests of shareholders as a whole,” said Winterflood Securities in a note last week. “This is especially true in the case of KPC, where the board had already put forward proposals for a managed wind-down with an uncapped cash exit at a 1% discount to NAV, with the option to roll over into an equivalent open-ended fund. We agree with the board that this remains in the best interests of shareholders, particularly as Saba’s proposals raise serious corporate governance concerns given the non-independence of the nominated directors.”

Investor turn-out is key

Winterflood said that Saba Capital’s success would depend on voter turnout at the general meeting scheduled for Keystone. The broker estimates that individual retail shareholders invested via platforms account for c.30% of the shareholder register.

According to the latest disclosures, Saba owns 5.7% of KPC’s share capital, although it also owns additional financial instruments that can potentially be converted to shares.  This would give them total voting rights equivalent to 28% of share capital.

“As such, we suspect that the GM will need strong support from institutional investors in order for the requisitioned ordinary resolutions not to pass,” Winterflood stated in its note.

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