US activist investor Saba Capital has stated its intentions to take over another investment trust today (24 August), with a requisition notice for the £907m Baillie Gifford US Growth trust.
The hedge fund owns around 29% of the trust’s shares and has nominated Jason Chen, Thomas H. McGlade and James Waterlow to be appointed as directors at the firm’s November annual general meeting.
At the time of writing, the board at Baillie Gifford recommended shareholders take no action currently and wait for any further announcements.
Commenting on the announcement, a spokesperson from Saba Capital said shareholders had “repeatedly suffered” under the existing board in recent years. “If our nominees are elected, we would urge them to offer all USA shareholders a 100% cash exit at or near NAV – providing a long-overdue liquidity event similar to those we have helped secure for shareholders across other UK investment trusts,” the spokesperson added.
Matthew Read, senior analyst at QuotedData, argued this “appears to be more of the same from Saba, with no new ideas on the table”.
“In a repeat of its previous tactics, it seems intent on repeatedly requisitioning USA in the hope that other shareholders eventually tire of the process, allowing it to gain control of the board through a war of attrition.”
While Read noted the FCA has proposed several changes, which should make it harder for larger shareholders to act to the detriment of smaller shareholders, these are not in place yet. As such, shareholders will need to turn out and vote if they value the current mandate, he explained.
Annabel Brodie-Smith, communications director of the Association of Investment Companies (AIC), agreed: “Shareholders should look out for Baillie Gifford US Growth’s response to Saba’s proposals.” It will be “critical” for shareholders to vote at the upcoming AGM to ensure their voices are heard on the company’s future, she continued.
The £900m trust has had a volatile performance in recent years, according to data from FE fundinfo. Over the past five years, the trust is one of the worst performers in the IT North America peer group, down 3.2%, while the average trust was up 70.9%.
However, three-year results have been much stronger, with the trust surging 123.1% compared to an average peer of 74.1%.
See also: ‘The outcome has unfolded exactly as anticipated’: Saba takes control of IEM
