The £960 million Baillie Gifford US Growth Trust (USA) said it has received a requisition notice from Saba Capital Management, the New York-based activist hedge fund that controls 29% of its shares.
Saba has put forward Jason Chen, Thomas McGlade and James Waterlow as candidates for election to the investment trust company’s board at its October AGM. Waterlow is a managing director at Saba Capital Management.
This continues Saba’s campaign against Baillie Gifford US Growth Trust — having lost a previous bid to seize control of the fund’s board in February last year.
In April, the chair of Baillie Gifford-managed Edinburgh Worldwide Investment Trust plc (EWIT) warned that the UK’s entire investment trust sector is at risk from activists after Saba Capital succeeded in replacing the entire board at EWIT.
After a tough 2022, Baillie Gifford US Growth Trust shares have bounced back under fund managers Gary Robinson and Kirsty Gibson with a 123% total over the past three years.
The performance has been helped by a 13.6% stake in SpaceX and holdings in other AI-connected stocks such as Anthropic, Nvidia, Databricks and Meta.
Matthew Read, senior analyst at QuotedData, said: “This appears to be more of the same from Saba, with no new ideas on the table.
“In a repeat of its previous tactics, it seems intent on repeatedly requisitioning USA in the hope that other shareholders eventually tire of the process, allowing it to gain control of the board through a war of attrition.
“The FCA has proposed changes that, if enacted, should make it harder for large shareholders to use the system in this way to the potential detriment of smaller investors.
“However, we are not there yet. As before, it is crucial that USA shareholders inform themselves and turn out to vote to protect their investment.”
Baillie Gifford US Growth Trust said: “The Board of Baillie Gifford US Growth Trust plc announces that it has received a requisition notice from Saba Capital Management, L.P. (via Vidacos Nominees Limited) requesting that the appointments of Jason Chen, Thomas H. McGlade and James Waterlow as directors of the company are put forward as ordinary resolutions at the forthcoming annual general meeting.
“The Board recommends that shareholders take no action at this time and await a further announcement from the Company in due course.”
The Association of Investment Companies (AIC) recently submitted its response to the FCA consultation on reform of the Listing Rules — saying the regulator needs to go further to close gaps in the rules affecting investment trusts exposed by Saba Capital.
The AIC proposed that when a substantial shareholder seeks to take control of the management contract of an investment trust, this should be subject to the approval of all other shareholders.
The AIC also urged the FCA not to build in a four-week delay before the implementation of new rules to protect shareholders.
Saba Capital said in a statement: “Saba Capital Management, L.P. (together with certain of its affiliates), the largest shareholder of Baillie Gifford US Growth Trust … announced that it proposed resolutions to be added to the notice of the company’s upcoming Annual General Meeting to enable USA shareholders to elect three new highly qualified directors: Jason Chen, Thomas H. McGlade and Sir James Waterlow.
“Saba also issued the following statement regarding its recommendation that, if elected, the nominees offer the Company’s shareholders a full cash exit at or near net asset value (NAV).
“Over the past five years, USA has underperformed the S&P 500 Index on both a price (-88.4%) and NAV return (-79.1%) basis.
“During that time, USA shareholders have suffered under a Board that has repeatedly put Baillie Gifford’s interests first.
“If our nominees are elected, we would urge them to offer all USA shareholders a 100% cash exit at or near NAV – providing a long-overdue liquidity event similar to those we have helped secure for shareholders across other UK investment trusts.”