by Dave Baxter, Investors Chronicle, December 18, 2024:
Saba Capital wants to remove the boards of seven investment trusts and enact measures it claims will deliver better shareholder value.
The activist investor, which has built stakes for several months, called for general meetings to be held at Baillie Gifford vehicles Baillie Gifford US Growth (USA), Edinburgh Worldwide (EWI) and Keystone Positive Change (KPC), as well as Henderson Opportunities (HOT) and European Smaller Companies (ESCT), run by Janus Henderson, plus Herald (HRI) and CQS Natural Resources Growth & Income (CYN).
The meetings, which it wants to be held by early February next year, would allow a vote on Saba proposals to oust current boards and replace them with its own directors. Candidates include Saba chief investment officer Boaz Weinstein and portfolio manager Paul Kazarian. Baillie Gifford said it was “aware of the letter” from Saba..
Much as Saba points to wide discounts and weak returns over three years, some of these trusts have begun a substantial recovery more recently..
Matthew Read, senior analyst at QuotedData, said it was “great to finally get some clarity on Saba’s intentions” but that the strategy came with an obvious flaw. “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’,” he said.
“However, those two are often mutually incompatible, particularly for some of the funds it is targeting where the underlying holdings are less liquid – 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.
“The call for substantial liquidity also ignores the unquoted positions held by trusts such as EWI and USA. These are long-term investments and, for some, the payouts can be big as has recently been illustrated by the spectacular success of SpaceX. Saba also seems to be targeting trusts facing cyclical challenges – such as CQS Natural Resources. History suggests that when Chinese demand for commodities picks up, this fund will perform extremely well and Saba’s plans would mean that ordinary shareholders miss out on that.”
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