You are probably aware of the big story of the moment, which is the attempt by Saba Capital Management to oust the boards of seven investment trusts in which it holds large stakes. It wants to offer cash exits or to seek the mandates itself for its own closed-end strategy. Shareholders will be asked to vote on their proposals.
The seven trusts in question are:
Baillie Gifford US Growth Trust
CQS Natural Resources Growth & Income
Edinburgh Worldwide
European Smaller Companies Trust
Henderson Opportunities Trust
Herald Investment Trust
Keystone Positive Change
We do not believe that any of the trusts targeted are in need of action, as Baillie Gifford US Growth Trust(USA) has shown strong signs of a turnaround and was one of the best performing shares in the sector last year; CQS Natural Resources (CYN) is a useful trust in what is already a small sector, and the board is already looking at options pro-actively; Edinburgh Worldwide (EWI) has again already tweaked its process and is returning some cash; European Smaller Companies Trust (ESCT) is a fundamentally good trust in our view that has been through the sort of cyclical downturn that we have seen before; Henderson Opportunities Trust (HOT) has probably reached the end of its life and looks too small, but the board has already proposed a wind-down; Herald Investment Trust (HRI) has a strong long-term record; and Keystone Positive Change (KPC) has already proposed a wind-down. We cannot see how Saba’s further participation will improve the outcome for any of these trusts – indeed it would mean that some perfectly good trusts would disappear or give up their current remits, with negative consequences.
There is a further existential issue here too, which is that if Saba does succeed in its plans, it may well come back with another list of trusts to target, so this is an important moment for the industry and one that should involve all shareholders.
In this context, we think that all shareholders should consider the arguments and MUST CAST THEIR VOTES.
The crucial point to understand here is that the EGM requisitions only require a simple majority of the votes actually cast, so apathy matters and could lead to undesired outcomes. All votes count, and the results will be very heavily scrutinised as a gauge for exactly how investment trust investors feel about these potential changes.
The first vote is for Herald Investment Trust on 22nd January, with the rest to follow thereafter. The voting deadline on stockbroking platforms may be earlier, so please watch out, keep an eye on your broking accounts, and ensure that you use your vote.
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