Home Money Showdown in the City: Legendary stock picker goes toe-to-toe with Wall Street raider in battle for future of London investment trusts

Showdown in the City: Legendary stock picker goes toe-to-toe with Wall Street raider in battle for future of London investment trusts

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Under attack: Katie Potts (pictured) has run Herald Investment Trust since its creation 30 years ago and has been acclaimed for her backing of a number of successful British companies.

One of the City’s most celebrated stock pickers will today go head to head with a Wall Street activist over the future of London’s historic investment trust industry.

Katie Potts has led Herald Investment Trust since its creation 30 years ago and has been acclaimed for backing a number of successful British companies in their early days.

But now he faces New York financier Boaz Weinstein, who through his hedge fund Saba Capital is trying to take control of seven London-listed investment funds – including Herald – by dismissing their entire boards and appointing his own allies. .

The meeting to determine Herald’s future will take place at noon today in the capital and Saba will need the backing of at least 50 percent of voting shareholders to be successful. The remaining six trusts will face their own votes in the coming days and weeks.

Today’s meeting will be seen as crucial for what lies ahead for the industry: experts hope enough private shareholders will vote to defeat Saba.

Potts, 65, founded Herald Investment Management in 1994 and remains its CEO to this day.

Under attack: Katie Potts (pictured) has run Herald Investment Trust since its creation 30 years ago and has been acclaimed for her backing of a number of successful British companies.

A graduate of Oxford University, she originally worked at engineering giant GKN before moving to the City in the 1980s amid the “Big Bang” caused by the Thatcher government’s deregulation of financial markets.

Potts originally worked at asset manager Barings before becoming a research analyst at investment bank SG Warburg, now part of Swiss group UBS.

He left the bank to found Herald Investment Management. The trust’s main focus is on small and medium-sized technology and communications companies in both the UK and US, and Potts aims to back companies that have the potential to grow rather than more established names that have valuations much higher.

As a result, the Herald’s portfolio counts companies such as California-based data center company Supermicro, Dutch computer chip maker BE Semiconductor and polling firm YouGov among its largest holdings.

Other UK companies backed by the trust include marketing group Next 15, engineering team Diploma and customer review website Trustpilot.

Over its three decades of existence, Herald has boosted Potts’ reputation as one of the city’s top stock pickers.

Since 1994, the investment trust has provided a return of around 2,355 per cent, meaning someone who invested £1,000 in Herald back then would have £24,550 today.

By contrast, investing in a tracker of the FTSE 100 index would have produced a return of 154 per cent over the same period.

One of Potts’ most successful bets was computer chip maker Cambridge Arm, which Herald backed when it was a small company.

The company became one of the largest technology companies in the world, with its chip designs used by companies such as Apple, Google and Nvidia. The weapons are listed on the US stock market at a value of £128 billion.

Attack: New York financier Boaz Weinstein tries to take control of seven investment funds listed in London through his hedge fund Saba Capital

Attack: New York financier Boaz Weinstein tries to take control of seven investment funds listed in London through his hedge fund Saba Capital

He now faces Wall Street raider and poker player Weinstein, 52, who through his hedge fund Saba hopes to take control of Herald along with six other investment funds.

The chess genius, who has faced world number one Magnus Carlsen, is known for taking risks.

Weinstein has been scathing of Potts’ recent stewardship of the trust, singling her out for criticism among several fund managers on his hit list.

Last week, the Wall Street investor called the Herald’s performance “appalling,” accusing Potts of doing “little or nothing” to stem a “torrent” of outflows from the trust in recent years.

However, he acknowledged that Potts has delivered “very good” returns during certain periods since the trust’s creation in 1994.

Raised on New York City’s affluent Upper West Side, the financier originally worked at wealth manager Merrill Lynch before moving to investment bank Donaldson, Lufkin & Jenrette and then Deutsche Bank in 1998.

It was on the German team where Weinstein would begin to make his mark. It benefited from a series of major economic shocks, including the massive fraud and subsequent collapse of the US energy group Enron in 2001.

He became one of Deutsche Bank’s youngest CEOs when he was promoted in 2001, at the age of 27.

In 2009, he left the bank with 15 other team members to form his current Saba Capital team.

Saba means “grandfather” in Yiddish, a tribute to Weinstein’s grandfather who survived the Warsaw Ghetto and rescued other Jews from the Nazis during World War II.

Trusts strengthen their defenses

Two investment funds under attack by Saba Capital have strengthened their defenses ahead of meetings called by the US hedge fund to remove their boards.

CQS Natural Resources Growth & Income, which will hold a vote on February 4, was supported by shareholder advisory firm Glass Lewis, which called on investors to oppose Saba’s plans for the trust.

CQS chairman Christopher Casey said the recommendation for Glass Lewis “underscores” the board’s view that Saba’s proposals “lacked merit” and would introduce “significant new risk” to shareholders.

Glass Lewis has also told investors to oppose the US hedge fund’s attempts to oust the boards of two other companies, Herald Investment Trust and Keystone Positive Change.

Meanwhile, Baillie Gifford US Growth Trust, another company in Saba’s sights, released its half-year results alongside a broadside accusing the US company of introducing “destructive and self-interested proposals” to gain control of the business.

The company, which focuses its portfolio on U.S. companies, reported its share price had returned nearly 41 percent in the six months through November, more than double the 15.3 percent return of its baseline. reference, the S&P 500 index.

Chairman Tom Burnet said the company’s “strong growth potential” would be “directly threatened” if Saba managed to take control of the trust and encouraged investors to vote against the US firm’s proposals.

“It is critical that (investors) do not miss the opportunity to save their investments from an uncertain and potentially destructive trajectory,” he added.

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