Good morning, and welcome to our live blog following a crucial week for the UK’s investment trust industry.
Follow this live blog for all the latest updates, reaction and analysis as shareholders of the investment trusts vote on Saba’s proposals.
The Saba saga so far
On 19 December, Saba announced that, as a significant shareholder in the trusts in question, it had requisitioned general meetings at seven UK investment trusts in order to address what it called “underperformance, persistent trading discounts and disengaged management teams”.
Its ‘Mind the Gap’ campaign sought to address steep trading discounts to net asset value (NAV) at the seven trusts by displacing their boards, and replacing them with new boards that, while including independent members, would include at least one of the hedge fund’s own employees as directors.
The proposals have attracted widespread criticism from the boards of the trusts themselves as well as investment trust industry experts. Saba has responded by claiming it is acting in shareholders’ best interests.
Saba’s campaign stumbled at the first hurdle when Herald Investment Trust shareholders voted against its proposals, but five more general meetings are taking place this week.
When are investment trust general meetings taking place?
The timetable for general meetings to vote on Saba's proposals is below. As you can see, the first meetings – those of Baillie Gifford US Growth and Keystone Positive Change are taking place today. We'll bring you live coverage of the results of these meetings as they happen.
Investment trust | General meeting date |
|---|---|
Baillie Gifford US Growth | 3 February 2025 – 12 noon |
CQS Natural Resources Growth & Income | 4 February 2025 – 11am |
Edinburgh Worldwide | 14 February 2025 –11.45am |
The European Smaller Companies Trust | 5 February 2025 – 12.30pm |
Henderson Opportunities Trust | 4 February 2025 – 10 am |
Keystone Positive Change | 3 February 2025 – 12 noon |
Source: Association of Investment Companies
AIC: Saba proposals would radically change investment trusts
In a statement to MoneyWeek, the Association of Investment Companies (AIC) said that “these upcoming votes couldn’t be more important for the shareholders of the targeted trusts.
“The Saba proposals would radically change these investment trusts by replacing the board and changing the mandate, manager and fees. Shareholders need to look carefully at the proposals, consider the response from the seven boards and vote their shares.
“Saba’s proposals would initially replace the current, independent boards of the seven trusts with just two new directors: Saba’s own representative and another director nominated by the firm,” says Richard Stone, CEO of the AIC. “Two directors would be an unusually small board for an investment trust given the functions the board performs, and having both directors so closely aligned to one major shareholder inevitably raises questions.”
“Although Saba suggests it will appoint further independent directors at a later stage, shareholders need to think through the implications of these two new directors taking control over the strategy, manager and mandate – fundamentally changing the risk and return profile of the trust,” its statement said.
Saba proposals bring proxy voters out in record numbers
The response to Saba’s proposals appears to be marking a turning point for shareholder voting, with investment platforms reporting a surge in shareholders exercising their rights to vote remotely.
Herald’s defeat of the Saba proposals saw record numbers of Hargreaves Lansdown (HL) customers vote through its platform, and data released today suggests that the upcoming votes are witnessing a similar trend.
Half of HL customers that are shareholders in Henderson Opportunities Trust have voted on the proposals – more than the 41% equivalent for the Herald vote. 54% of HL shareholders in the European Smaller Companies Trust have exercised their votes through HL’s platform.
“We are pleased to see such high engagement and record high voting levels following our campaign to encourage investors to express their right to vote,” says Emma Wall, head of platform investments at Hargreaves Lansdown. “Shareholder rights are one of the key benefits of the investment trust structure and that is why we want to make it as easy as possible for HL clients to vote, whatever their choice, and why we have proactively informed impacted shareholders.”
As of 2 February the fund with the lowest proportion of HL shareholders that have voted through the platform is Edinburgh Worldwide Investment Trust, at 28%. However, Edinburgh is on a separate schedule from the other trusts, with the general meeting scheduled for 14 February, and voting open via HL’s platform up until 10 February (voting through the platform for the other trusts has now closed).
AJ Bell also sees huge proxy turnout
We’re hopefully not far off hearing results from this afternoon’s general meetings.
76% of AJ Bell customers who hold shares in the European Smaller Companies Trust have voted on the measures through the platform. Even the lowest (besides Edinburgh Worldwide, for which voting is still open), Baillie Gifford US Growth Trust, still has a turnout of 60% on AJ Bell’s platform.
“This is an extremely high turnout for a shareholder vote and reflects the importance of the proposals being put forward, and the ease with which platform investors can exercise their voting rights,” says Laith Khalaf, head of investment analysis at AJ Bell. “These voting figures show that shareholder democracy is alive and well, and when important matters are on the line, ordinary investors are willing to come out to vote.
“There had been some scepticism expressed at whether retail shareholders would exercise their voting rights, but it’s now clear that huge swathes of them have defied the doubters,” he added.
BREAKING: Baillie Gifford US Growth Trust shareholders reject Saba proposals
Baillie Gifford US Growth vote: Saba soundly beaten
A stark defeat for Saba as 65.6% of votes cast in the US Growth general meeting went against its proposals. Excluding Saba’s own votes, 98.5% of votes went against its proposals.
The total votes cast represent approximately 78.4% of the company’s total voting rights.
"Faced with the threat to their investment posed by Saba's self-serving and destructive proposals, shareholders have mobilised and acted decisively to protect their investment. The result is unambiguous and conclusive,” says Tom Burnet, chair of the Baillie Gifford US Growth Trust.
“We would like to thank shareholders for their support at this important moment for the Company. We are delighted, in particular, by the number of retail shareholders who have voted and played a key role in this positive outcome and encourage them to continue to make their voices heard.”
BREAKING: Keystone shareholders reject Saba proposals
Keystone shareholders overwhelmingly oppose Saba’s proposals
Shareholders in the Keystone Positive Change Investment Trust have voted by a huge majority to reject Saba’s proposed requisitions.
Excluding Saba’s votes, which represent around 39% of the total, just 0.8% of votes cast were in favour of its proposals.
“I would like to thank all the shareholders who stood up to vote in support of the Board’s recommendation. Of the votes cast, nearly 99 per cent. of the non-Saba shareholders rejected its proposals,” said Karen Brade, chair of Keystone Positive Change Investment Trust.
"Now our focus returns to delivering the proposed Scheme that offers an uncapped cash exit and/or a rollover into a more liquid fund with a similar global impact strategy. We are confident that this remains in the best interests of shareholders,” Brade added. "The Board intends to re-engage with stakeholders without delay in order to implement this Scheme as soon as practicable."
A victory for shareholder democracy
Saba’s attempts to dislodge the current board of the seven UK investment trusts it is targeting were based in large part on an assumption that shareholders of the trusts, particularly retail shareholders, would be lethargic in their response.
“The impressive turnout of retail investors demonstrates what can be achieved when shareholders are informed, enabled and motivated to have a say on their trust,” said Richard Stone, Chief Executive of the Association of Investment Companies (AIC).
“Today's votes highlight the importance of shareholder democracy and represent a strong repudiation of Saba's proposals by a clear majority of shareholders,” said James Budden, head of global marketing at Baillie Gifford (which manages Keystone as well as the US Growth Fund). “Shareholder engagement is crucial to the health of the investment trust sector. Hopefully the quantum of the vote cast today is a sign that such participation can be more common in the future.”
"The UK investment trust sector is far from cosy, sleepy and complacent,” he added.
Edinburgh Worldwide chair encourages shareholders to vote
“It is good to see both Keystone and Baillie Gifford US Growth shareholders resoundingly oppose Saba’s proposals. Shareholders clearly want a strategy and governance framework they have chosen rather than the short-term financial arbitrage offered by Saba,” says Jonathan Simpson-Dent, chair of Edinburgh Worldwide Investment Trust.
Saba’s initial nominee for the Edinburgh board didn’t hold sufficient shares in the trust, which invalidated the original requisition notice. While Saba has subsequently addressed the issue, Edinburgh’s general meeting is now over a week behind the other trusts, taking place next Friday, 14 February.
As such, Edinburgh Worldwide shareholders still have time to vote on the proposals, and in Simpson-Dent’s view it is imperative that they do so.
“We remind shareholders that voting is open for Edinburgh Worldwide ahead of our general meeting and AGM on February 14, and that they need to vote twice both against Saba in the GM and for the Board in the AGM. Edinburgh Worldwide has the highest proportion of retail investors and therefore a bigger battle to stop Saba,” he said.
Earlier today, Simpson-Dent acknowledged that independent voting advisers Glass Lewis, ISS and PIRC had recommended shareholders vote against Saba’s proposals.
“I’m encouraged that the independent voting advisers, which many institutional investors widely rely upon, have all highlighted serious concerns about Saba’s plans to replace an independent and expert Board with one which we firmly believe is conflicted from the outset and not fully aligned to your interests,” he said.
Thanks for joining us today to cover the unfolding saga as Saba is defeated in another two votes on its attempts to displace investment trust boards.
Good morning, and welcome back to our live coverage as two more investment trusts vote on proposals from New York hedge fund Saba Capital to displace their boards and replace them with its own appointees.
- Henderson Opportunities Trust at 10am
- CQS Natural Resources Growth & Income at 11am
Results will probably follow several hours after the start times of the meetings. We'll bring you live updates and reaction as the results come in.
Interactive Investor sees proxy voting surge for Saba general meetings
Both today’s crucial general meetings are now underway. We’ll bring you the results when we have them.
“For the three investment trusts that have voted against Saba’s proposals, between 69% and 76% of shares were voted across the Interactive Investor platform. This shows that when shareholders are being asked to vote on a big issue – they turn up in big numbers,” says Kyle Caldwell, funds and investment education editor at Interactive Investor.
“Over the past three years we’ve seen greater levels of engagement among our customers, with 30% of shares voted across the ii platform last year. This is up from 27% in 2023, and 22% in 2022,” adds Caldwell. While acknowledging that “there is always room for improvement”, he says that the platform’s drive “to make voting as easy as possible” has been a contributor towards greater shareholder engagement.
BREAKING: Henderson Opportunities Trust shareholders reject Saba's proposals
Liquidity options now key for Henderson Opportunities Trust
Following its successful defeat of Saba’s proposals, the Henderson Opportunities Trust board is now focused on delivering on its own promises to deliver liquidity to shareholders – and has called on Saba to respect the process of doing so.
“The Board's priority now is delivering full and free choice to all shareholders via the proposed scheme of reconstruction. All shareholders, including Saba, will have the choice of an unrestricted cash exit at NAV and/or the option of a tax-efficient rollover into a UK equity focused open-ended fund,” said Wendy Colquhoun, chairman of Henderson Opportunities Trust.
“As part of its campaign, Saba has publicly stated its aim to deliver substantial liquidity options to all shareholders. The scheme proposed by the Board is designed to achieve this. The Board therefore calls on Saba to respect the decision made by the Company's shareholders at today's meeting and support the scheme of reconstruction.”
BREAKING: CQS Natural Resources becomes fifth trust to defeat Saba in vote
CQS Natural Resources shareholders reject Saba’s proposals
That’s five defeats on the bounce for Saba as CQS Natural Resources shareholders follow four other investment trusts’ lead.
In total, 59% of the votes cast were against Saba’s requisitioned resolutions. Once again, almost all the votes cast by non-Saba shareholders – 98.6% – were against its proposals.
“The strong vote against Saba’s proposals speaks loud and clear – the majority of our shareholders have shown the confidence in the existing Board and have voted to have them steer the Company in the future,” said Christopher Casey, chair of CQS Natural Resources Growth and Income.
“Our shareholders have voted to support the existing objectives of the Company – to provide shareholders with capital growth and income from a portfolio of mining and resources stocks - and the board which oversees them.”
AIC comments on Saba investment trust votes
The Association of Investment Companies (AIC) has commented on today’s votes at Henderson Opportunities Trust and CQS Natural Resources Growth & Income.
“The defeat of these resolutions demonstrates the combined power of thousands of individual shareholders, as well as wealth managers and institutions, who backed the investment trusts’ boards,” says Richard Stone, chief executive of the AIC.
Stone added that shareholders in Edinburgh Worldwide – whose general meeting doesn’t take place until next week – are running out of time to exercise their votes.
“It’s essential that shareholders in Edinburgh Worldwide who have not yet voted their shares do so, as the deadline is fast approaching,” he said.
Thanks for joining us again today. That's everything for now. Join us again tomorrow, as the European Smaller Companies Trust becomes the fifth investment trust this week to vote on Saba's proposals.
European Smaller Companies Trust votes today
Good morning, and welcome back to our live blog following investment trusts’ votes on proposals from Saba Capital.
When does the European Smaller Companies Trust vote take place?
The European Smaller Companies Trust’s general meeting starts at 12.30pm today. The results of the vote will likely be released a few hours afterwards.
After that, just one investment trust is still to vote on Saba's proposals – Edinburgh Worldwide, on Friday 14 February.
AIC: shareholders value investment trusts
Following the European Smaller Companies Trust (ESCT) becoming the sixth investment trust in a row to heavily defeat Saba’s proposals, Richard Stone, chief executive of the Association of Investment Companies (AIC) has said that “it’s clear that shareholders value investment trusts’ long-term approach to investing and the independent oversight provided by boards of directors”.
He added, though, that “it’s not over yet. The Edinburgh Worldwide vote is on Valentine’s Day and shareholders need to act now to be sure of meeting platform deadlines”.
Investment trust | Date of general meeting | AJ Bell | Hargreaves Lansdown voting deadline | Interactive Investor |
|---|---|---|---|---|
Edinburgh Worldwide | 14/02/2025 | 10/02/2025 | 10/02/2025 | 11/02/2025 |
Source: AIC / platforms. Voting deadline is close of business on the stated date. * AJ Bell will handle any late votes on a best efforts basis.
Lack of clarity scuppers Saba's proposals
“With six of the seven requisitioned investment trusts having held their General Meetings, it looks like it’s ‘check mate’ (or at least ‘check’) for Saba, with less than 2% of other shareholders supporting their proposals at each of the meetings,” says Emma Bird, Head of investment trust research at Winterflood.
Winterflood, well-known for its investment trust research, was “pleasantly surprised” by the level of shareholder turnout at the votes. “Our initial view on this episode was that Saba could have won several of the votes purely based on low voter turnout,” writes Bird.
“We generally view activism in the investment trust sector as positive, given that it can drive shareholder returns and improve corporate governance. However, the proposals put forward by Saba did not appear to be in the best interests of all shareholders, even if their criticism of manager performance and/or Board inaction was, frankly, in some instances merited,” says Bird.
“Nevertheless, we suspect that the key reasons why this US hedge fund failed to gain the support of other investors include: the likelihood of a considerable change in strategy that was not desirable to current shareholders; a lack of clarity on the proposals, including regarding the extent of capital returns in most cases; and concerns around Board independence.”
Thanks for following our live blog this week as five investment trusts have decisively voted against Saba's proposals. Saba itself is yet to respond to any of this week's votes.
One final post to leave you with: a quick summary of the percentage of the votes case that went for and against Saba's proposals:
Investment trust | Votes cast for Saba's proposals | Votes cast against Saba's proposals |
|---|---|---|
Herald Investment Trust | 34.9% | 65.1% |
Baillie Gifford US Growth | 34.4% | 65.6% |
Keystone Positive Change | 39.5% | 60.5% |
CQS Natural Resources Growth & Income | 40.9% | 59.1% |
Henderson Opportunities Trust | 34.4% | 65.6% |
The European Smaller Companies Trust | 37.9% | 62.1% |
Source: AIC
The Saba saga continues
Of seven trusts that Saba originally targeted for a takeover, one (Edinburgh Worldwide) is yet to vote. That’s coming this Friday. Shareholders of the other six have decisively voted down Saba’s proposals.
However, on Monday, Saba announced that based on the “thoughtful feedback” it received from “fellow shareholders”, it is adopting a new approach.
Saba now wants to convert four investment trusts – two of which were among the original seven targeted, two of which weren’t – into open-ended funds, with the same strategy and the same manager.
“Our goal is simple: provide you the opportunity to remain invested in the same strategy within an open-ended fund structure that will never trade at a discount to NAV,” wrote Boaz Weinstein, founder and chief investment officer of Saba Capital.
Which four investment trusts is Saba targeting now?
- CQS Natural Resources Growth and Income PLC (LON:CYN)
- European Smaller Companies Trust PLC (LON:ESCT)
- Middlefield Canadian Income PCC (LON:MCT)
- Schroder UK Mid Cap Fund PLC (LON:SCP)
“While MCT and SCP were not part of our initial campaign, we believe they have traded at wide discounts for too long and that their shareholders would greatly benefit from an open-ended fund structure,” wrote Weinstein. “Of the seven trusts targeted in our initial campaign, we have focused on CYN and ESCT because we believe they are best positioned for an open-ended fund conversion and, unlike HOT and KPC, their boards have not shown an intent to take this action on their own.”
How might Saba’s new proposals work?
“We have not yet seen the requisition notices that Saba has said it intends to deliver to these four investment trusts or the detailed proposals. It is therefore unclear how they intend to provide any conversion or rollover into an open-ended vehicle with the same manager and strategy,” said Richard Stone, chief executive of the AIC.
“This marks a significant shift in strategy by Saba. They now appear to recognise the proposals already put forward by the boards of two other trusts they had previously targeted – Henderson Opportunities Trust and Keystone Positive Change.”
“We need to ensure that all shareholders have the opportunity to vote on the future of their trust,” Stone added.
CYN responds
This morning, CYN's board put out a statement slamming Saba’s change of strategy.
“We are disappointed to receive another requisition from Saba without any dialogue and which follows a very recent shareholder vote firmly endorsing the ongoing CYN Board strategy,” wrote chairman Christopher Casey.
“Not only do we already hold an annual continuation vote, but we have announced a strategic review which is advanced. Our priority remains ensuring the best outcome for all shareholders.”
The statement described the new proposal as “without merit” and advised shareholders to take no action at this time.
That's everything from us for this evening, but join us again tomorrow, as this story is clearly far from over. We'll keep you updated as the Saba saga continues.
Good morning, and welcome back to our live blog covering the latest developments in Saba's attempts to influence the governance and strategy of UK investment trusts.
Why open-ended funds?
Because of their unique structure, it is common for investment trusts to trade at a discount to their NAV. It’s also possible for them to trade at a premium, though there are reasons why this is rarer; effectively, because of the costs that would be incurred if they were to suddenly liquidate their assets and return them to shareholders, it's more usual for them to trade at discounts.
Weinstein and Saba’s rationale in converting the trusts into open-ended funds is therefore an attempt to eradicate these persistent discounts by changing the trusts’ structure.
What’s the problem with discounts?
Source: theaic.co.uk / Morningstar. Ex 3i and VCTs.
The trusts that Saba is targeting are all trading at discounts, but these range from 4.3% in the case of Henderson Opportunities, to 10.4% in that of Middlefield Canadian.
Now, of course, these premiums have narrowed significantly since the start of Saba’s campaign, and in the run-up, as the share prices of the trusts increased as Saba built up its stake.
The point is, though, that even double-digit discounts are not unusual for the industry in the current climate. As the chart shows, they’ve been the norm for much of the past 30 years.
In fact, Nick Britton, research director at the Association of Investment Companies (AIC), points out that even if discounts don’t narrow, their impact on shareholder returns is limited – especially to regular savers taking a long-term approach.
Read more about Britton’s thoughts in our explainer: should investors worry about investment trust discounts?
The day ahead: Edinburgh Worldwide votes
While Saba appears to have moved on from its initial goal of replacing the boards of seven investment trusts, the last of those – Edinburgh Worldwide – votes on the proposals today.
Will Edinburgh Worldwide shareholders make it seven defeats in seven votes for Saba? We’ll bring you all the results live as it happens, as well as further analysis and insight into Saba and the UK investment trust ecosystem.
When is the Edinburgh Worldwide vote?
Edinburgh Worldwide’s shareholders are meeting at 11.45am today. Proxy voters were required to submit their votes by 12 February.
We’ll likely know the results two or three hours after the meeting starts.
What has Edinburgh Worldwide said about Saba proposals?
On 20 January, Edinburgh Worldwide’s board wrote to shareholders advising them to vote against Saba’s proposals.
“Saba is totally silent on Edinburgh Worldwide’s sustained period of outperformance from 2016 to 2021, and has focused exclusively on the turbulent period for growth investing between 2021 to 2023,” wrote Jonathan Simpson-Dent, chair of Edinburgh Worldwide.
The letter also highlighted the steps the trust had already taken to return capital to shareholders, including a share buy-back programme and reviewing a potential capital return programme of up to £130 million.
AIC comments on Edinburgh Worldwide vote: "End of round one"
The Association of Investment Companies (AIC) has responded to the news of Edinburgh Worldwide voting against Saba’s proposals.
“This is the end of round one, but Saba’s most recent requisitions show that this may not be over yet,” said Richard Stone,chief executive of the AIC.
Referencing Saba’s shift in investment trust strategy, Stone added that “shareholders are being asked to choose between an investment trust, with its long-term approach and structural advantages, and an unknown open-ended alternative.
“They will need to give this careful consideration and vote accordingly.”
Thank you for following our live blog so far. We'll be back next week to cover the next steps in the Saba saga, as the focus turns from the boards of the trusts to their categorisation.