How to vote on Saba's investment trust proposals: It's your money, don't miss your chance
- You don't need to attend meetings to vote: We explain what to do
Sponsored by Baillie Gifford
Investors must make sure they have their say as a US hedge fund targets popular investment trusts.
US-based Saba Capital Management is seeking to gain control of seven investment trusts and make wholesale changes.
If it succeeds in removing the trusts’ boards and replacing them with just two of its own directors, Saba is likely to take over the management of the trusts and change how they invest, which would have an impact on small investors.
Baillie Gifford manages three of the investment trusts, Edinburgh Worldwide, Baillie Gifford US Growth Trust and Keystone Positive Change and is warning investors not to miss the chance to have their say by voting in general meetings scheduled for February.
James Budden, Head of Global Marketing, Baillie Gifford, says: ‘We urge all shareholders to act on this occasion, to clearly understand the choices facing them, and to ensure their voices are heard. Every vote matters.’
Investment trust boards have spoken out against Saba’s move, with Keystone Positive Change chair Karen Brade saying: ‘We believe its proposed resolutions would be highly detrimental to the interests of all other shareholders.’
Investors do not have to attend the meetings to vote, they can have their say online ahead of time and vote via investment platforms if they hold shares there – and the voting process can often be completed in minutes.
We explain what you need to know.
Have your say: Investment trust holders have the righ to vote on Saba Capital's proposals to take them over - and must not miss their chance
What is happening with these investment trusts
In December, New York-listed hedge fund Saba Capital mounted a bid to take control of seven UK investment trusts, having built up substantial shareholdings in them.
Three are managed by Baillie Gifford: US Growth Trust, Edinburgh Worldwide and Keystone Positive Change.
The others targeted are Herald, European Smaller Companies, CQS Natural Resources and Henderson Opportunities.
Investment trusts are investment vehicles listed on the stock market that pool investors’ money together to invest in portfolios of shares, bonds, property and other assets.
They have an investment manager who chooses where to invest and a board of directors that oversees the trust and acts on shareholders’ behalf. Some date back more than 100 years.
Saba proposes to replace the trusts’ current directors with two of its own candidates, and it is likely to then take on management and potentially change their investment mandates.
Votes will take place on Saba’s proposals at general meetings requisitioned by the hedge fund and the investment trusts’ shareholders are entitled to have their say.
Individual investment trusts and investment platforms have published explanations of the Saba issue and how to vote. Investors should contact their investment trust or platform to find out more.
The Association of Investment Companies (AIC) has a How to vote your shares guide on its website, to explain what people need to know.
Why investors should vote
Investors who hold the investment trusts need to vote to ensure that they have a say in what happens to their money.
If Saba gets more than half the votes cast, its proposals will pass. Alternatively, if enough shareholders vote against the hedge fund, its plans will stall.
Baillie Gifford explains that Saba has built up significant stakes in the investment trusts and if individual investors don’t exercise their right to vote, they will find matters taken out of their hands.
Historically, retail shareholders do not vote at general meetings, often because they invest through investment platforms and do not know how they can exercise their right to vote.
Saba holds 29 per cent of Baillie Gifford US Growth Trust, 23 per cent of Edinburgh Worldwide Investment Trust, and 29 per cent of Baillie Gifford Keystone Positive Change Investment Trust at timing of writing
The concern is that a lack of engagement or investor inertia could allow Saba to take over the trusts, with not enough other shareholders having their say.
For example, the board of Keystone Positive Change said other shareholders representing at least 30 per cent are required to vote against the resolutions to ensure they are blocked.
Richard Stone, chief executive of the AIC, said: ‘We provide information on our website for investors who hold investment trusts on platforms on how to vote their shares and attend meetings.
‘It’s vital that shareholders vote on the future of their investment trust. The final decision rests with them. They can also take the opportunity to attend the general meetings and ask questions.’
> Read the AIC guide: How to vote your shares
Speak up: The AIC is urging shareholders to make sure that they cast their vote
How to vote
Investment trust shareholders are entitled to attend meetings and vote on what happens to the companies that they hold a stake in.
Those who hold share certificates should be contacted by investment trusts directly to notify them of events and votes and explain what to do.
For the Saba proposals, investors do not need to attend meetings in person and can use proxy votes. But they must ensure forms of proxy are completed by a deadline, which falls ahead of the vote itself.
The deadline for proxy vote forms for Baillie Gifford US Growth Trust and Keystone Positive Change is midday on 30 January 2025. Voting deadlines on platforms vary and will be earlier and shareholders should check with them directly.
Many small investors now hold shareholdings through investment platforms, which use nominee accounts, and can either cast their votes collectively or allow them to vote individually.
The major investment platforms are committed to increasing shareholder engagement and many make it quick and simple for investors to have their say.
Platforms have been seeking to get individual investors to vote on the Saba proposals, which can be done via their websites.
If you hold any of the trusts affected, look out for correspondence, or go to their websites to find out how to vote. Those who hold shares via investment platforms should look for emails, check their inbox at their platform, or contact it directly.
Information for shareholders
> Baillie Gifford US Growth Trust
> AIC: How to vote your shares guide
What do the investment trusts say?
Most of the boards of the investment trusts targeted by Saba have spoken out strongly against the move and urged investors to vote against the proposals.
Baillie Gifford US Growth Trust has strongly recommended investors vote against Saba. It pointed out that the trust has excellent long-term performance and that its short-term performance ‘is recovering strongly following the challenging market environment post-pandemic that impacted growth equity investors’.
The US Growth Trust added: ‘Saba's proposals lack detail, with potential material conflicts of interest. We believe Saba's interests are not aligned with those of long-term shareholders.’
Karen Brade, Chair of Keystone Positive Change, said: ‘We are appalled by Saba's actions and conduct. We believe its proposed resolutions would be highly detrimental to the interests of all other shareholders.
‘Be under no illusion – we believe this US hedge fund manager is acting opportunistically, seeking to seize control of the Board without a controlling shareholding, to pursue its own agenda. We believe Saba’s plan lacks transparency, would flagrantly disregard good governance, and may introduce substantially inflated fees.
‘The proposed resolutions are not in the best interest of all shareholders and create significant uncertainty.’
Baillie Gifford’s James Budden said: ‘Saba cherry-picked data when our style of investing was out of favour to portray a narrative of poor performance and wide discounts.
‘We recognise the past few years have been tough for the companies we invest in; however, performance has notably improved throughout 2024.
‘Baillie Gifford US Growth Trust returned 56 per cent and Edinburgh Worldwide returned 24 per cent in share price terms. This outperformance has been reflected in tighter discounts.
‘Investing in exceptional growth companies requires patience and conviction. We are confident that our investment approach can outperform over the longer term.’
