Investment trusts at crunch point

James Crux, Shares Magazine, 16 January 2025:

The normally sleepy world of investment trusts received a wake-up call just before Christmas with the publication (18 December 2024) of a shareholder letter by activist investor Saba Capital Management calling for change at no fewer than seven well-known funds..

‘Initially Saba is proposing to replace the current independent boards with just two new directors. Saba has stated an intention to follow this with a replacement of the investment manager and a completely new investment mandate. This would likely change the asset exposure, investment risk and return profile of the companies, moving them away from the original choice made by investors.’.

In the case of Edinburgh Worldwide, QuotedData’s Matthew Read says it would be ‘completely nonsensical’ for shareholders to cede control to one dominant shareholder who can then act entirely in its own interests, ‘particularly when that shareholder’s proposals look very short term in nature and said shareholder is also proposing to install itself as the trust’s manager – managers controlling boards being a huge corporate governance No No, in fact we generally advocate that companies should have no representatives of the manager on their boards.’

CQS Natural Resources Growth & Income has published its circular in relation to the requisition, urging shareholders to vote against, highlighting similar issues to that have been raised by other boards..

QuotedData’s James Carthew says: ‘Saba’s cherry-picking of statistics to suit its narrative, vague promises and cynical attempt to force its agenda on ordinary shareholders must be rejected.’

Read more here