Home Money Investment trusts make final appeals to investors ahead of Saba takeover vote

Investment trusts make final appeals to investors ahead of Saba takeover vote

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Saba Capital founder Boaz Weinstein is targeting seven London-listed investment trusts with a bid to replace boards and management.

the joints of The European Small Business Trust and Edinburgh around the world have followed their investment trust peers in making their final pleas to shareholders to reject proposed acquisitions by Saba Capital.

Last week, Saba unveiled plans to reform and merge up to seven investment trusts it has targeted in an explosive takeover attempt.

The hedge fund hopes to launch a new strategy targeting London-listed investment companies that trade at deep discounts to net asset value.

Founder Boaz Weinstein once again criticized boards and management, accusing them of failing shareholders after disappointing performance and a prolonged period of high discounts.

The board of directors of The European Smaller Companies Trust said on Monday that Saba was guilty of “deliberate misdirection” by ignoring “the company’s strong investment performance to advance its own agenda.”

The investment trust has outperformed its peers in AIC European Smaller Companies over one, three, five and ten years, adding 18.5, 8, 61.9 and 239 percent in each time period, respectively.

Its board says the trust has also outperformed its benchmark in every period since Ollie Beckett took over as portfolio manager in 2011.

Saba Capital founder Boaz Weinstein is targeting seven London-listed investment trusts with a bid to replace boards and management.

The trust currently has a discount to net asset value of around 8.8 per cent, having reduced significantly from a high of 17 per cent in early 2023.

The board also warned investors that Saba “intends to radically change its company’s investment strategy… at a time when the sector is attractively valued.”

Chairman James Williams said: “Saba’s intentions are now clear: they want to take control of their company, appoint themselves as managers, benefit from potential management fees and change the investment approach.”

Saba’s proposals will be brought to investors in The European Smaller Companies Trust on February 3.

Edinburgh Worldwide called its annual general meeting on Monday to coincide with Saba’s vote, giving investors the opportunity to confirm the re-election of current directors and “provide a clear mandate” to continue the trust’s current strategy.

Chairman Jonathan Simpson-Dent urged investors to exercise their voting rights, warning that “Saba is betting on a repeat of low voter turnout at previous shareholder meetings.”

He said: ‘The Edinburgh Worldwide Investment Trust is under attack by Saba, a US hedge fund manager.

‘Saba has been clear; He wants to raise cash from the Trust portfolio that Baillie Gifford has built for the long term, and he wants to earn fee income by setting up as an investment manager and turning the Trust into a Saba fund of funds.’

Simpson-Dent warned that investors could be stuck with “a mandate you have not chosen, a manager with no experience in Edinburgh Worldwide’s specialist area, a loss of independence and a loss of the strict governance and safeguards for regular shareholders at the United Kingdom”.

He added: ‘Simply put, I don’t think they are the right people to represent you as shareholders.

‘On a personal level, I am deeply concerned about Saba’s proposals. Investment trusts are extremely democratic by definition; Saba’s proposals are not.

“Saba’s open land grab for its own purpose exploits our long-standing retail shareholder base, who typically do not vote.”

Edinburgh Worldwide, which invests in a portfolio of public and private assets, will face its Saba vote on February 14.

The fund managed by Baillie Gifford, which currently has a discount to NAV of around 4.9 per cent, has returned 31.7 per cent over the past 12 months and 138 per cent over the past 10 years.

However, it has lost 21 and 7.6 percent in three and five years, respectively, according to the Association of Investment Companies.

Co-directors Douglas Brodie, Luke Ward and Svetlana Viteva wrote in an open letter on Monday that performance had been disproportionately affected by the global pandemic and the resulting rise in inflation and interest rates.

“Our deliberate and structural tilt toward immature companies that are built for the future was deeply out of sync with a stock market that craved short-term cash flows and predictability,” they said.

Management acknowledged “some errors in execution” and noted “how frustrating the last three years of poor results have been for shareholders.”

They said: ‘We have learned important lessons and, over the past year, we have sought to apply them to our investment and portfolio management processes, with the crucial challenge and support of the Board.

‘As such, we have enhanced our ability to patiently support management teams while holding them accountable for strong execution.

‘The performance of recent investments has stabilized. We believe 2024 will be a major turning point for EWIT. Combined with our enduring enthusiasm for our mission, we are energized by the sense that we are entering a new period of returns.’

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