The meetings, which saw shareholders vote on Saba’s proposals to replace the current boards with their own nominees, both saw investors back the incumbent leadership.

Over 60% of votes cast in each meeting were against Saba’s proposals. 98.5% of Baillie Gifford US Growth’s non-Saba shares voted against the resolutions, while just 0.8% of Keystone’s non-Saba shares backed the US hedge fund’s proposals.

See also: Gold funds surge in January as tariff fears mount

The result follows on from a similar vote at Herald Investment Trust on 22 January, at which investors also backed the existing board.

CQS Natural Resources Growth & Income and Henderson Opportunities Trust will hold their own general meetings on Saba tomorrow, before the European Smaller Companies Trust meets on 5 February.

Edinburgh Worldwide shareholders will vote on 14 February.

As with Herald, shareholder engagement was high with 78.4% of total voting rights being used at the Baillie Gifford US Growth trust meeting.

Richard Stone, chief executive of the Association of Investment Companies (AIC), said: “It’s encouraging to see so many shareholders of Baillie Gifford US Growth and Keystone Positive Change come out and vote on this critical issue.

“The impressive turnout of retail investors demonstrates what can be achieved when shareholders are informed, enabled and motivated to have a say on their trust. Our campaign ‘My share, my vote’ aims to change the Companies Act so everyone receives information on their company and can vote.”

65.1% of the total votes cast were against the eight requisitioned resolutions, which would have seen the trust’s board replaced by Saba’s nominees if passed.

A majority of the trust’s total shares with voting rights participated in the vote.

PA Events: PA Live: A World Of Higher Inflation 2025

In a stock exchange announcement, the board said only a further 59,221 non-Saba shares, representing just 0.15% of the votes cast, voted in favour of the resolution.

Saba’s shares represented 34.75% of the total votes cast.

Andrew Joy, chair of Herald Investment Trust, said the result provides a “clear, complete and incontrovertible rebuttal” of Saba’s proposals.

“The votes against Saba’s proposals were supported by independent proxy advisers including Glass Lewis and ISS. It is perfectly clear that the reason Saba’s proposals were rejected is that they were intended to lead to an outcome, namely Saba managing Herald, which the existing shareholders were simply not interested in.

“The reason shareholders invested, and continue to invest, in Herald is for long-term capital appreciation through investing in smaller technology companies, and they do not wish to be deprived of the opportunity to enjoy more of the same. They did not invest in Herald to become part of a short-term trading strategy.”

See also: BlackRock enters pact with Saba to ‘not seek to control or influence the board’

Following the vote, Saba’s Boaz Weinstein said he had been encouraged by the “thoughtful engagement” from fellow Herald shareholders in recent weeks.

“Over a brief period, our campaign has already enhanced value for shareholders and incited positive change at HRI – and elsewhere in the U.K. market – as evidenced by discounts to net asset value narrowing and numerous trusts announcing shareholder-friendly actions.”

He added that Saba would continue to pursue changes it believes are necessary to improve the trust.

“Saba remains committed to putting shareholders’ interests first, delivering returns for UK trust investors and ultimately rehabilitating this broken sector. We urge shareholders of the six other trusts at which we have requisitioned General Meetings to support Saba’s resolutions in order to set these trusts on the path to meaningful value creation.”

‘Victory for shareholder democracy

Reacting to the outcome, Richard Stone, chief executive of the Association of Investment Companies, said: “It’s very encouraging to see Herald shareholders turn out to vote in such numbers.

“This is a victory for shareholder democracy. There are six other trusts with votes just around the corner. It’s vital that all shareholders vote on the future of their investment trust. Shareholders need to act now.”

Voting on similar proposals for the six other trusts requisitioned by Saba will take place over the coming weeks.

Baillie Gifford US Growth and Keystone Positive Change will vote on 3 February, a day before CQS Natural Resources Growth & Income and Henderson Opportunities Trust.

The European Smaller Companies Trust meeting is scheduled for 5 February, before Edinburgh Worldwide shareholders vote on 14 February.

US-based hedge fund Saba Capital is attempting to take ownership of seven UK investment trusts in total that it currently owns shares in, including Keystone Positive Change, Henderson Opportunities Trust and Baillie Gifford US Growth.

Plans put forward by Saba, which was founded by its CIO Boaz Weinstein in 2009, would see the trusts’ independent boards replaced by two new directors, as well as a change to the companies’ mandates and investment managers.

See also: Update: Saba plans full cash exit option for Herald

According to a London Stock Exchange announcement published today (14 January), ISS has stated that Saba “has not presented a compelling case for change, let alone a case for a majority position on the board and a strategy overhaul” ahead of Herald’s general meeting. It has therefore recommended that shareholders vote against the requisitioned solutions at the meeting, which will take place at midday at 10-11 Charterhouse Square in London.

The recommendation follows a circular published by Herald investment trust on 3 January this year, whereby the board unanimously recommended that shareholders vote against Saba’s attempted takeover.

Andrew Joy, chair of Herald investment trust, said: “The board of Herald welcomes and is encouraged by the recommendation from ISS for shareholders to vote against the requisitioned resolutions proposed by Saba on 22 January 2025. The recommendation supports our belief that the proposals from Saba are not in the best interests of all shareholders, and we strongly urge all shareholders to vote against the requisitioned resolutions proposed.”

The Herald investment trust is the first company to have scheduled a meeting for shareholders to vote on the proposals, with a majority of the other trusts scheduling meetings during the first week of February.

Herald hits back at performance claims

In a separate LSE announcement this morning, Herald investment trust’s board has responded to Saba’s claims that its strong performance track record justifies its desire to take over the trust.

See also: Saba Capital launches campaign to replace seven investment trust boards

According to Herald, the trust has “materially outperformed” the Saba Capital Master Fund – the US firm’s flagship product – since its launch in August 2009 – on both an annualised and cumulative basis.

“The board believes that the Saba Master Fund has delivered an annualised net return of approximately 4.8% from 1 August 2009 to 7 June 2024 (being the latest date to which its performance data is available from public sources), implying a cumulative return of approximately 99.5% (in each case calculated in USD, the Saba Master Fund’s base currency),” it said. “In direct contrast, Herald’s annualised NAV total return over the same period was 14.1%, or a cumulative return of 611.4% (in each case calculated in GBP, Herald’s base currency).”

“Furthermore, the reported discrete annual returns for the Saba Master Fund raise questions regarding the potential volatility of Saba’s strategy. For the 13 years that annual performance data is available publicly from third party sources and press articles (2010 to 2023 inclusive, with the exception of 2017. Only cumulative or partial data is available for 2009, 2017 and 2024), the Saba Master Fund delivered negative annual performance in six of the 13 years according to such sources.

“Over the same period, Herald’s discrete annual NAV total return was negative in only three years.”

See also: Baillie Gifford: ‘We are appalled by Saba’s actions and conduct’

Therefore, Herald’s board does not believe that appointing Saba to take over the trust would be in the best interests of shareholders, adding that the firm wants to take control of the trust, “in part, add to its own assets under management”.

“Saba’s proposals, which lack any meaningful detail apart from the intention to appoint itself as manager, fundamentally change the company’s investment strategy and offer an uncapped cash exit on uncertain terms, risk significant value destruction for shareholders and are the anthesis of the company’s successful long-term investment approach.”

Herald’s board added: “The board believes that Saba’s proposals are designed for its own economic benefit and will be to the detriment of those shareholders who wish to remain invested in a proven strategy which has delivered a 27x NAV total return since the first day of dealings.”

The 100% cash exit would come at 99% of the trust’s total net asset value, which currently sits at £2.5bn.

In a statement, Saba said the cash exit would be overseen by a fully independent board, which would not expect it to occur for at least a year.

The plans to offer a full cash exit come in response to shareholder feedback, the firm said.

The requisitioned general meeting, at which Herald investors will vote on Saba’s proposal to replace the board with their own nominees, will take place on 22 January.

See also: Trusts targeted by Saba campaign urge shareholders ‘take no action’

Herald responds

The Herald board responded to Saba’s announcement, noting that Saba is not proposing to offer 99% of the value of today’s net asset value.

“Instead Saba is proposing an exit after ‘at least a year’ during which open-ended time period significant value could be lost from the underlying portfolio in anticipation or consequence of Saba’s known selling appetite,” the board said in a stock exchange announcement.

They added that the board has engaged with “many shareholders”, who they say have not expressed a wish for Saba to take over the management of the company.

Andrew Joy, Herald chair, said: “Herald has delivered strong investment performance. Since the first day of dealings (21 February 1994) the Company has delivered a 27x NAV total return.

“In direct contrast to Saba’s promise of the “opportunity for greater long-term returns under a new investment strategy”, the Herald Board does not believe that Saba’s long term performance track record supports this.”

See also: IA: UK reinvests in November following two months of exits

Reacting to both announcements, QuotedData head of investment company research James Carthew said that the Herald board’s argument is “straightforward”.

“More worrying to us is the tortured logic in Saba’s statement in which it claims to know what an independent board would do at some point in the future, clearly implying that it believes that it can direct the board’s actions. We cannot get our heads around how a board consisting of Saba employees, Saba appointees, and persons that these Saba-connected directors later co-opt onto the board could ever be construed as independent.

“We iterate our belief that investors should not surrender control of these trusts to this vulture investor. Furthermore, if Saba does seize control and seeks to impose its particular investment approach on the portfolio, investors should be given an exit at NAV, not at a 1% discount.”

The US hedge fund has requisitioned the boards of Baillie Gifford US Growth Trust, CQS Natural Resources Growth & Income, Edinburgh Worldwide Investment Trust, European Smaller Companies Trust, Henderson Opportunities Trust, Herald Investment Trust and Keystone Positive Change Investment Trust.

Saba, which owns 19-29% shares in each trust, is seeking to replace the boards of each trust. The activist investor said that it believes new boards are necessary to narrow discounts and correct underperformance.

See also: Saba Capital and its intentions for the UK investment trust industry

Boaz Weinstein, founder & CIO of Saba Capital, said in an open letter to shareholders: “Performance demonstrates that they have not taken sufficient steps to resolve the trusts’ structural issues, depriving shareholders of superior returns. While there are multiple levers to narrow these persistent discounts, inaction has been the consistent course of current leadership.”

At each meeting, which Saba said would be scheduled by early February, shareholders of the trusts will vote on removing all current directors of each trust and replacing them with new candidates.

If appointed, Weinstein said the new directors would assess all options available to the trusts, including terminating the trusts’ current investment management agreements and potential combinations with other investment trusts.

Reaction

Saba has been building its positions in investment trusts over the last two years and, after a long wait, it has finally publicly declared its intentions.

Stifel analyst Iain Scouller said: “Overall, we think it is helpful for the sector to have Saba’s game plan revealed and shareholders and boards can now take positions for or against these proposals. We also think given Saba’s significant voting power by the virtue of the size of their stakes, that they will be successful in changing the boards of a number of the trusts involved.

“We think it is now over to the boards of the Trusts to argue why Saba’s proposals should not be supported – they will need to come up with some strong counter-proposals themselves.”

Matthew Read, senior analyst at QuotedData, said that while clarity on Saba’s interests in the sector was welcome, he argues there is an ‘obvious flaw’ in their strategy.

“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’.

“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.”

See also: How do asset managers logistically prepare for major events?

He added that the call for substantial liquidity also ignores the unquoted positions held by trusts such as Baillie Gifford US Growth and Edinburgh Worldwide, while Read questions the logic behind targeting Keystone Positive Change, which is considering folding into its open-ended sister fund.

“This and the other challenges we highlighted above have long made us feel that Saba doesn’t really understand some of the funds that it is invested in,” Read added.

“It is well-documented that Saba has been successful with similar attacks in the US but the UK closed end fund market is fundamentally different. Standards of corporate governance are higher, and returns have generally been better, so this sort of approach makes less sense, particularly now that progress has been made on addressing problems such as the cost-disclosure issues and so discounts are now retrenching.

“It seems to us that their approach is very short-term in nature and this highlights a long running issue that, because many retail investors hold their shareholdings through platforms and do not tend to vote, that large professional investors get a disproportionate amount of the vote.

“This can lead to outcomes that are not in the interests of all shareholders and so we think that it is all the more important that shareholders in these funds make sure their interests are being protected and that they make sure they get out and vote.”