As we write, the first five investment trusts targeted by Saba have seen the US activist hedge fund proposals overwhelmingly voted down.

As a brief reminder Saba was proposing to replace the current independent boards with two new directors and had stated an intention to follow this up with a replacement of the investment manager and a new investment mandate. 

After Herald Investment Trust (HRI) shareholders voted against the proposals on 22 January, their counterparts at Baillie Gifford US Growth (USA), Keystone Positive Change (KPC), Henderson Opportunities Trust (HOT) and CQS Natural Resources Growth & Income (CYN) have followed suit. The outcome of a vote at European Smaller Companies Trust (ESCT) was set to be announced as we went to press.

With very few independent shareholders voting with Saba, the challenge for the trusts was always going to be getting the retail investor vote out in numbers and they did.

Data from AJ Bell, shown in the table, reveals investors on the platform turned out in their droves As Laith Khalaf, head of investment analysis at AJ Bell comments: ‘Retail shareholders have come out in force to have their say on the proposals put forward by Saba. These voting figures show that shareholder democracy is alive and well, and when important matters are on the line, ordinary investors are willing to come out to vote.’

The last trust in Saba’s crosshairs where the votes are still being counted is Edinburgh Worldwide (EWI), with a meeting set for 14 February. Although Saba does notably have stakes in several other trusts so further action on its part cannot be entirely ruled out. That includes at the names where meetings have already been requisitioned.

Deutsche Numis analyst Ewan Lovett-Turner suggests all of the trusts affected so far will need to stay vigilant with Saba potentially using votes on the reappointment of directors at AGMs and on a looming three-year continuation vote at Herald in particular to exert influence.

‘The board may need to mobilise shareholders again for this event, or it may face Saba voting down the resolutions,’ he says.

Describing recent events as a ‘wake-up call for the sector’, Lovett-Turner adds: ‘We believe that boards need to be more proactive about managing discounts, providing liquidity, stimulating demand and demonstrating a focus on shareholder returns. To “keep the wolf from the door” discounts need to be kept relatively narrow, which may require a wider range of measures than it did historically,’

DISCLAIMER: Financial services firm AJ Bell referenced in this article owns Shares. The author (Tom Sieber) and editor (Ian Conway) of this article own shares in AJ Bell. Ian Conway owns shares in Edinburgh Worldwide

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