Final Baillie Gifford investment trust rejects US activist

Shareholders in Edinburgh Worldwide, the global smaller companies trust from Baillie Gifford, have voted against US activist investor Saba Capital’s proposals to overhaul its board.

This means that all seven of the trusts targeted initially by Saba have now rejected the proposals, which would ultimately have led to new investment approaches.

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Edinburgh Worldwide shares were voted 63.8% against Saba’s resolutions. A total of 36.2% of shares voted in favour of Saba’s resolutions, including the shares held by Saba.

The conclusive results follows similar outcomes at the other trusts initially targeted: Keystone Positive Change, Baillie Gifford US Growth, The European Smaller Companies Trust, Henderson Opportunities, CQS Natural Resources Growth & Income and Herald.

In each case, the vast majority of the shares not held by Saba voted against the proposals.

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If Saba had secured 50% or more votes, its longer-term plan was to potentially merge some of the trusts to form a new strategy of purchasing other discounted trusts.

Jonathan Simpson-Dent, chair of Edinburgh Worldwide, said: “Edinburgh Worldwide’s shareholders have spoken: they have rejected Saba Capital’s proposal for a fundamentally different strategy based on fundamentally different principles with a fundamentally different investment approach.

“Today’s result confirms that this unique mandate still appeals, but shareholders also expect the trust to deliver. We took decisive action in 2024 with positive early results. Our job now is to deliver the performance our shareholders rightly expect.”

The UK investment trust industry will interpret the clean sweep of rejections as a big win. However, Saba’s involvement will also be a wake-up call for the sector, where big discounts have become the norm.

Ewan Lovett-Turner, head of investment companies research at stockbroker Numis, says: “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.”

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Despite racking up only losses so far, Boaz Weinstein, who runs New York-based hedge fund Saba Capital, has outlined plans to hold general meetings at three more investment trusts, including one trust targeted in the initial campaign, where he is attempting to convert them into open-ended funds to secure liquidity at net asset value for shareholders.

The trusts are CQS Natural Resources Growth & Income, Middlefield Canadian Income and Schroder UK Mid Cap. The European Smaller Companies Trust was initially part of this list but Weinstein has since withdrawn the general meeting request following “constructive” talks.

On calling these general meetings, Saba Capital said: “During our campaign to deliver value to shareholders of UK-listed investment trusts, we received thoughtful feedback from our fellow shareholders that has shaped the request we now plan to put forward at CYN, ESCT, MCT and SCP.

“While we acknowledge that shareholders were not ready to fully replace the boards with new directors, it was clear from our conversations that many investors agree with Saba on one crucial point: the importance of the option for liquidity at net asset value (NAV).”