Saba Capital has suffered the sixth defeat in its campaign against seven investment trust boards, after European Smaller Companies Trust shareholders voted to stick with the current board.
Similar to the votes at the first five trusts targeted by Saba, the overwhelming majority of shares that weren’t held by Saba voted against the proposals to overthrow the board of directors — with Saba only attracting a further 0.5% of votes to vote in favour of their plans.
Overall, 62.1% of the votes cast were against Saba’s proposals. 76.86% of shares were voted.
James Williams, chair of The European Smaller Companies Trust, said: “Today’s vote is a clear and complete rejection of Saba’s proposals and a resounding endorsement of ESCT’s proven investment strategy, the quality of its independent Board and the manager’s ability to deliver outperformance.”
See also: Saba loses Henderson Opportunities and CQS votes
The final general meeting of Saba’s campaign will be held on 14 February, at which Edinburgh Worldwide shareholders will have their say on the proposals.
Reacting to the latest meeting, Emma Bird, head of investment trust research at Winterflood, said: “With six of the seven requisitioned investment trusts having held their general meetings, it looks like it’s ‘check mate’ (or at least ‘check’) for Saba, with less than 2% of other shareholders supporting their proposals at each of the meetings.
“Our initial view on this episode was that Saba could have won several of the votes purely based on low voter turnout, with all of the funds having a high percentage of their shares held by individual retail investors, who typically are less active in voting.
“However, we have been pleasantly surprised by the strong turnout of these market participants, helped by mobilisation campaigns from the AIC and other stakeholders. Encouraging broader shareholder interest and participation can only be a good thing.”
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Since Saba initially launched their activist campaign against the seven investment trust boards, there has been an uptick in board action across the entire sector.
“We generally view activism in the investment trust sector as positive, given that it can drive shareholder returns and improve corporate governance,” Bird added. “However, the proposals put forward by Saba did not appear to be in the best interests of all shareholders, even if their criticism of manager performance and/or board inaction was, frankly, in some instances merited.
“We also recognise that the presence or threat of Saba on shareholder registers has likely been a key driver of the increase in board action across the entire investment trust sector in recent months, including the initiation of strategic reviews, the proposal of mergers and the introduction of a range of discount control measures.
“Nevertheless, we suspect that the key reasons why this US hedge fund failed to gain the support of other investors include: the likelihood of a considerable change in strategy that was not desirable to current shareholders; a lack of clarity on the proposals, including regarding the extent of capital returns in most cases; and concerns around board independence.”