by Kyle Caldwell from interactive investor,18th December 2024:
US activist investor Saba Capital has called for the removal of board members at seven investment trusts in which it is the largest shareholder, owning stakes between 19% and 29%..
Saba Capital has called for general meetings to take place for each trust by early February, and has proposed replacing the entire board of each trust. The hedge fund has also named some of the new directors it wants in place..
According to Saba Capital, lacklustre performance is behind big discounts for investment trusts over the past couple of years..
However, for five of the seven trusts – Edinburgh Worldwide (0.6% premium); Baillie Gifford US Growth (1.4% premium); Herald (-0.6% discount); Henderson Opportunities (-0.1% discount) and CQS Natural Resources (-1.2%) – their discounts have narrowed notably over the past couple of months and now trade very close to their NAV..
Matthew Read, senior analyst at QuotedData, says Saba’s plan to “quickly deliver substantial liquidity and long-term returns for all shareholders’ are two objectives that are ‘are often mutually incompatible’”.
Read adds that some of the investment trusts it is targeting have underlying holdings that are less liquid.
He says: “Herald being 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..
Read says that if retail investors don’t use their votes, this will result in “large professional investors getting a disproportionate amount of the vote”.
He adds: “This can lead to outcomes that are not in the interests of all shareholders and so we think it is all the more important that shareholders in these funds make sure their interests are being protected and get out and vote.”
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