Pressure on Gore Street Energy Storage (GSF) from activist investors has mounted following this week’s half-year results with Saba Capital doubling its stake to 10% and RM Funds calling on the board to cut costs and consider appointing a new investment manager.
Saba, the US hedge fund currently embroiled in an argument with Baillie Gifford over SpaceX, increased its position from 5% last Friday. This was just before they tumbled 10% on Monday in response to the disappointing interims. These accompanied news of a 10.6% decline in total asset value with a lower-than-expected dividend, although the company pointed to a “substantial increase” in operational capacity and the completion of construction projects. Saba first invested in October.
RM Funds, the 6% shareholder which requisitioned an extraordinary general meeting of shareholders in July to challenge the former board over performance and governance issues, urged its new directors chaired by Angus Gordon Lennox to get a grip on what it called a “fee-ding frenzy” by Gore Street Investment Management.
It claimed the fund manager had earned £41m in fees over the past four-and-a-half years and calculated that even after recent cuts to the annual management fee, GSIM could at the current rate earn £46.25m over the next few years.
“That is egregious on any reasonable comparison, particularly relative to peers who typically operate with far simpler arrangements and materially lower fee leakage,” RM Funds portfolio manager Pietro Nicholls said in an open letter to shareholders.
Nicholls said RM Funds was aware of “credible” approaches by other investment managers to take on the GSF mandate. “In the absence of any announced protective notice, formal tender process, or other transparent market-testing of the IMA [investment management agreement] and associated contracts, we assume that such approaches have not been substantively progressed and, as far as we are aware, may not have received meaningful engagement under the outgoing chair [Patrick Cox].
“That should now change. We expect the newly refreshed board to take a fresh look at the entire fee structure and to run a proper competitive process as a matter of urgency,” said Nicholls. He warned RM Funds could seek further changes to the board and push for the continuation vote to be brought forward from 2028 if actions were not taken to improve the share price.
GSF shares were unchanged at just over 54p at a 40% discount to their reduced net asset value of 90.1p. Including dividends, they have lost 37.6% in the past three years as renewable infrastructure funds have struggled with higher interest rates and flawed cost disclosure rules.
