By MIKE SHEEN, This is Money, 19 December 2024:
An activist investor is hoping to seize control of seven underperforming London-listed investment trusts after urging shareholders on Wednesday to sack their respective boards..
Saba has built stakes of 19 to 29 per cent in each of the trusts, which have suffered yawning discounts to their net asset value as investors have shunned their shares.
The trusts affected are Baillie Gifford US Growth, CQS Natural Resources Growth & Income, Edinburgh Worldwide, European Smaller Companies, Henderson Opportunities, Herald Investment Trust and Keystone Positive Change.
An ‘obvious flaw’ in Saba’s strategy?
Baillie Gifford, which manages US Growth, Edinburgh Worldwide and Keystone Positive Change, acknowledged the letter but did not comment further.
This is Money has also contacted Janus Henderson, manager of European Smaller Companies and Henderson, and Herald Investment Management for comment.
Below, Matthew Read, a senior analyst at investment trust specialist QuotedData, explains why he sees ‘an obvious flaw’ in Saba’s strategy.
‘Saba wants shareholders to replace the current boards and deliver on its plan to ‘quickly deliver substantial liquidity and long-term returns for all shareholders’.
‘However, those two are often mutually incompatible, particularly for some of the funds it is targeting where the underlying holdings are less liquid.
‘Herald [is] the obvious example as it is a big fund with a huge tail of small illiquid positions that trade by appointment that could take years to sell off and you would likely move the market against you in many of these, particularly once the market spots you as a forced seller.
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