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Investors urged to struggle again in opposition to US energy seize as hedge fund targets seven London-listed trusts

Private shareholders have been urged to vote on the future of seven investment trusts amid an attempted coup by a US hedge fund.

Boaz Weinstein, founder of Saba Capital, is pushing for a huge shake-up that would mean that directors at the trusts are replaced by him and his allies.

The Association of Investment Companies (AIC), which represents the investment trust sector, said that Saba was proposing ‘major changes’ to the targeted firms and that it was ‘vital’ that shareholders made their voices heard.

‘Investors need to understand the details of what is being proposed by Saba, including changes to the trusts’ boards, strategy, manager or fees,’ said AIC boss Richard Stone.

‘They need to consider whether the investment trust would still meet their needs, as well as any potential tax implications.’

The AIC has written to the UK’s major retail investment platforms, ‘urging them’ to inform investors of the upcoming meetings at the trusts so they can vote on Saba’s proposals. 

Shake-up: Boaz Weinstein (pictured), founder of Saba Capital, is pushing for a huge shake-up that would mean that directors at the trusts replaced by him and his allies

Shake-up: Boaz Weinstein (pictured), founder of Saba Capital, is pushing for a huge shake-up that would mean that directors at the trusts replaced by him and his allies

It comes as two of the investment trusts targeted by Saba encouraged shareholders to oppose the US firm’s plans.

James Williams, chairman of The European Smaller Companies Trust, said that Saba was attempting to take control of it by ‘removing a highly qualified, independent board that acts in all shareholders’ interests’. 

He added that Saba’s motives were ‘self-serving’ and could ‘endanger shareholder protections’.

Meanwhile, Wendy Colquhoun, chairman of the Henderson Opportunities Trust, said Saba’s plans would bring ‘significant’ uncertainty and risk and implored investors to vote against the proposals.

‘The board’s message to shareholders is clear: please exercise your vote and don’t let Saba take unnecessary risks with your money,’ Colquhoun said. It follows similar remarks on Tuesday from CQS Natural Resources Growth and Income, another trust in Weinstein’s crosshairs.

Chairman Christopher Casey said Saba’s plans were ‘without merit’ and the US firm’s claims of the trust’s underperformance were misleading.

Saba hit back, accusing Casey of making ‘inaccurate, unsubstantiated claims’ about its track record, adding that the chairman was putting shareholder value at risk.

The firm also turned its guns on the European Smaller Companies and Henderson Opportunities trusts, saying that their boards had ‘failed shareholders’ and made some poor investment decisions.

Overall, Saba is calling for a shake-up of seven London-listed investment trusts, which collectively have a market value of around £4billion.

On Tuesday, Evelyn Partners became the first shareholder to declare its opposition to Weinstein’s plans.

The group will vote against the proposals at Baillie Gifford US Growth, where it is the fourth- largest investor with a 5 per cent stake, and at Herald Investment Trust, where it holds 1 per cent.

It was joined yesterday by Rossie House Investment Management, which is a shareholder in five of the seven trusts targeted by Saba.

Rossie House partner Scott Baikie said that the hedge fund’s proposals were ‘opportunistic’ and would be ‘damaging for the trusts’.

Q&A: Saba’s raid on UK trusts 

What are investment trusts?

Companies listed on the London Stock Exchange that invest in portfolios of stocks, bonds or other assets such as property.

They have a long history in the UK dating back to the Victorian era when they funded railways and other engineering projects.

Trusts today continue that tradition by investing in areas such as renewable energy, transport and other infrastructure.

Who are Saba Capital?

Saba Capital is a New York hedge fund founded by investor Boaz Weinstein, 52, a chess master and accomplished poker player.

He formerly worked at Deutsche Bank on Wall Street before leaving to set up Saba in 2009. 

It owns stakes ranging from 19 per cent to 29 per cent in each of the seven trusts it is targeting. On its website, Saba says it manages around £4.3billion worth of assets.

What are Saba’s plans?

If its proposals are approved by investors, Saba says it will remove all current directors of the seven trusts.

In their place, it will appoint what it says are ‘highly qualified candidates’. Those up for election include Weinstein as well as Paul Kazarian, a Saba partner and portfolio manager.

Why are they targeted?

Saba has accused the managers of the seven investment trusts of under-performing.

The issue is the gap between the value of the assets the trusts own – and the value of the trusts themselves on the stock market

Saba says that this ‘discount’ shows that the current directors of the seven trusts have ‘failed’ to deliver good enough returns to investors.

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