Linus Uhlig, Investment Week, 29 January 2025:
The chair of Edinbugh Worldwide investment trust (EWI) questioned US activist hedge fund Saba Capital about its ability to provide liquidity to shareholders and to handle private assets, should it be successful in its attempt to oust the EWI board at the upcoming general meeting in February.
In a letter seen by Investment Week sent to Saba on Tuesday (28 January), EWI’s chair, Jonathan Simpson-Dent, explained that he has “specific concerns about the execution risk” of the proposals that have “been broadly applied to all seven investment trusts targeted in this campaign”.
In previous communications, Saba said it plans to offer “immediate” liquidity to investors near to net asset value, a claim that Simpson-Dent queried.
According to EWI’s chair, promising to liquidate some of the holdings in the closed-ended fund’s portfolio could lead to a “fire sale of assets” because the portfolio comprises a mix of listed small-cap holdings and unlisted investments.
Speaking to Investment Week, James Carthew, head of investment companies research at QuotedData, explained the risks associated with trying to extract liquidity from typically quite illiquid assets.
He said: “You cannot liquidate those portfolios at NAV in a hurry, it just cannot happen. If everybody knows you are a seller, it is going to be quite hard work. It is going to take time, and it is probably going to destroy value.”
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