Two more investment trusts run by Baillie Gifford have urged shareholders to reject all proposals by New York hedge fund Saba Capital Management to remove the funds’ existing directors and appoint Saba’s own candidates.
The £800 million Baillie Gifford US Growth Trust called the hedge fund’s proposals “self-serving and destructive” and the £170 million Keystone Investment Trust said it was “appalled by Saba’s actions and conduct.”
Saba’s Founder & Chief Investment Officer is activist investor Boaz Weinstein.
Baillie Gifford US Growth Trust chair Tom Burnet said: “Since IPO in March 2018, the company has delivered exactly what it promised: an investment trust through which its shareholders can access and benefit from some of the most exciting growth opportunities in both public and private US companies in a low-cost structure that can be held for the long-term.
“Accordingly, shareholders who invested at IPO in 2018 have nearly tripled their initial investment. Further, the growth outlook for our portfolio companies is extremely strong. Baillie Gifford’s global reputation provides it with preferential access to the US growth companies of tomorrow, so the future of this company is bright.
“Saba wants to subvert all of this.
“Their proposals lack detail and if implemented, could destroy the board’s independence, radically alter the investment strategy of the company and prove highly disruptive to shareholder value.
“We urge all shareholders to make their voices heard and to vote against Saba’s self-serving and destructive proposals.”
Keystone Investment Trust chair Karen Brade said: “We are appalled by Saba’s actions and conduct. We believe its proposed resolutions would be highly detrimental to the interests of all other shareholders.
“Be under no illusion we believe this US hedge fund manager is acting opportunistically, seeking to seize control of the Board without a controlling shareholding, to pursue its own agenda.
“We believe Saba’s plan lacks transparency, would flagrantly disregard good governance, and may introduce substantially inflated fees. The proposed resolutions are not in the best interest of all shareholders and create significant uncertainty.
“In absolute contrast to Saba, your board has actively engaged with shareholders in recent months to understand their priorities and concerns.
“In response, we have put forward a credible plan that reflects the feedback received, and aligns with Saba’s own prior request for a cash exit by Q1 2025. Our plan offers shareholders clear choices: an uncapped cash exit; a transfer to a more liquid fund pursuing a similar investment strategy, or a combination of both.
“Your board remains unwavering in its rejection of Saba’s proposals. Given Saba’s considerable voting position, every vote against its resolutions is vital.
“We strongly urge all shareholders to vote against all resolutions – a high turn-out is critical. Refraining from voting will risk ceding control of your company to Saba.”
Saba Capital Management responded: “It is appalling that KPC Chair Karen Brade has overseen cumulative underperformance of nearly 130% since assuming her role in 2018 – a staggering loss and destruction of wealth for retail holders and retirees.
“Contrary to KPC’s fearmongering tactics, Saba has an award-winning track record in closed-end activism that has provided liquidity, low fees and better management to deliver long-term value for all shareholders.”
Saba Capital Management said last month it has requisitioned the boards of seven UK investment trusts “to convene general meetings of shareholders to provide shareholders the opportunity to vote on resolutions to remove the Trusts’ existing directors and appoint highly qualified directors to replace them.”
Three of the seven funds are managed by Edinburgh-based Baillie Gifford.
The funds being targeted are: Baillie Gifford US Growth Trust, Baillie Gifford’s Edinburgh Worldwide Investment Trust, Baillie Gifford’s Keystone Positive Change Investment Trust, European Smaller Companies Trust, CQS Natural Resources Growth & Income, Henderson Opportunities Trust and Herald Investment Trust.
Saba says it “holds an interest” in approximately 19% to 29% of each trust’s shares, making the hedge fund “the largest investor in each Trust.”
Last week, Edinburgh Worldwide chairman Jonathan Simpson Dent reiterated the trust’s commitment to “protect” the fund, ensuring the trust can continue with its “exciting mandate” and “stop Saba seizing control.”
On Moday, Simpson Dent added: “Edinburgh Worldwide is an exciting and unique investment trust that offers unparalleled access to emerging companies, operating at the frontiers of science and technology.
“All this is threatened by Saba Capital. The proposals set out by Saba amount to a backdoor attempt to seize control of the trust. We will urge all of our investors to protect their investment, to protect their trust – and to vote to stop Saba.”
Last month, Saba said: “Saba is convening the General Meetings because we believe the current Boards of Directors and investment managers have failed to perform versus their benchmarks and have, therefore, required Saba’s investment to narrow the deep trading discounts to net asset value and deliver returns for shareholders.”
Baillie Gifford added: “Shareholders in the Baillie Gifford US Growth Trust, Edinburgh Worldwide Investment Trust and Keystone Positive Change Investment Trust are urged to take action in the face of potential wholesale changes proposed by Saba Capital Management, a US-based hedge fund.
“Saba has acquired significant stakes in these trusts and is proposing to replace all current directors of the three trusts with its own candidates. If successful, Saba would then intend to assume management of the trusts and would be expected to change each trust’s investment mandate.
“The Boards of the US Growth Trust and Keystone Positive Change issued circulars on Monday 6 January strongly advising shareholders to vote against all the requisitioned resolutions proposed by Saba. The Board of Edinburgh Worldwide reiterated its conviction in the trust’s vision and strategy saying it will urge all shareholders to vote against the resolutions and will convene a general meeting in due course.
“Shareholders will vote on the proposals at general meetings scheduled for early February 2025. If 50% of the votes are cast in Saba’s favour, its proposals will pass, and the potential changes will affect all trust shareholders.
“All shareholders are urged to act on this occasion, to clearly understand the choices facing them, and to ensure their voices are heard. Every vote matters.”