The end of the month isn’t just an opportunity to wave goodbye to the January blues – or meet the deadline for filing tax returns and paying any due tax.
Bar a few days either side, it’s also a crucial date for shareholders in seven stock market-listed investment trusts that US hedge fund manager Saba Capital Management has its beady eye on.
Unless these trust investors want their money to be run in the future by Saba – and for the life of me I can’t see why any sane investor would want such an outcome – they need to vote against the proposals put forward by this corporate opportunist.
By building sizeable stakes in these trusts over the past year, Saba has manoeuvred itself into a position where it can call for an overhaul of their boards. And this is exactly what it has done.
As a result, shareholders in each of the seven are being asked to vote on booting out the existing directors – and appointing in their place two Saba representatives.
The results will then be revealed at ‘requisitioned’ meetings, starting with the smaller companies’ investment trust Herald a week on Wednesday and ending with Edinburgh Worldwide (managed by Baillie Gifford) early next month.
Facts and figures: Unless these trust investors want their money to be run in the future by Saba, they need to vote against the proposals put forward by this corporate opportunist
Sandwiched in between will be votes at Baillie Gifford US Growth and Baillie Gifford Keystone Positive Growth (both February 3); CQS Natural Resources Growth & Income and Henderson Opportunities (both a day later); and European Smaller Companies on February 5.
The votes are part of a pincer movement by Saba. If it gets its people on the boards, it will then seek to remove the incumbent investment managers and smash the trusts together to create one amorphous fund.
Indeed, if Saba is successful, it could then try the same manoeuvre with other trusts it has accumulated stakes in.
Investment trusts are far from perfect and have been through some self-inflicted crises – most recently the split-capital trust crisis of the 1990s.
Yet, as James Budden, head of global marketing at Ballie Gifford, reminded me a few days ago, the investment-trust industry is a super illustration of financial Darwinism in action.
Around since the 1860s, the industry has evolved. Trusts that no longer fulfilled a purpose have been wound up or taken over, while funds exploring new investment themes (for example, infrastructure or energy) have been launched.
They also continue to back businesses large and small, both here in the UK and overseas – listed companies and sometimes unquoteds.
Importantly, corporate governance has improved, with trust boards far more prepared to jettison underperforming investment managers than they were ten years ago. Annual charges on some of the bigger trusts have also been tickled down to the benefit of shareholders.
If Saba gets its way, we will lose funds that add to the rich cornucopia of the investment-trust industry – funds that in some instances have provided shareholders with outstanding long-term returns.
For example, Herald, a £1.2 billion global smaller-companies trust, has been managed by Katie Potts of Herald Investment Management since its launch nearly 31 years ago. To say she – and her team – have done a sterling job is an understatement.
Potts has generated a share price return for investors since launch in excess of 2,800 per cent.
To put this figure into some form of perspective, the Russell 2000 Technology Index (small cap) and the Deutsche Numis Smaller Companies plus AIM Index have delivered respective returns of 792 and 620 per cent. Potts lives and breathes smaller companies – especially quoted technology, media, and telecoms stocks.
She provides investors with the opportunity to make money from a skill set that few in the City – let alone Saba – possess.
The trusts under attack are battling back. Budden says Ballie Gifford is adopting a ‘multi-pronged’ approach – writing directly to shareholders of the three trusts it manages to warn them of the big bad investment wolf waiting on the doorstep.
It is also using social media and adverts to spread its message.
But at the end of the day, the future of the seven is in the hands of shareholders. Never has shareholder engagement been more critical. If you are among them, you have two choices. You can watch from the sidelines and see whether Saba gets its way. An approach which I do not advise, especially if you are content with how your money is being managed.
Saba only needs a majority of voting shareholders to support its resolutions to achieve its aim.
Alternatively, you can demonstrate shareholder enfranchisement by casting your vote against every resolution put forward by Saba. A vote for long-term investment opportunity over corporate opportunism.
The Association of Investment Companies has put together some useful information on how to vote – https://www.theaic.co.uk/how-to-vote-your-shares.
Careful driver punished by app for careful drivers
A massive thank-you to readers who contacted me over the festive period to tell me of their car insurance woes – and in some cases their joys.
In the next couple of weeks, I will be reporting in full on their tribulations and successes in dealing with sky-high renewal notices.
But as a juicy taster, I would like to tell you about the recent experience of Catherine Ferrell, 75, a retired medical research administrator from Dunmow, Essex.
Catherine drives a four-year-old Audi Q3 – and does a modest 6,000 miles a year. Since January 2022, she has been insured with Aviva.
Six months into her cover for 2023, she was asked whether she would like to add the MyAviva app to her phone. This would monitor her driving and potentially lower her premiums. Being a cautious driver, she jumped at the chance.
‘I could see every journey I made,’ says Catherine, ‘with the app scoring me on five aspects – cornering, braking, speeding, any mobile phone usage, and acceleration.
‘By the end of 2023, I was regularly getting scores in the 90s out of 100.’
Top marks, top price: Catherine Ferrell and her MyAviva app
When Catherine’s renewal premium for 2024 came in at nearly £369 – 23 per cent higher than the year before – she thought it might have been lower if she had used the app for the full year. So, she decided to stick with it. She wished she hadn’t.
Despite averaging 96 across all five scores for 2024, her renewal premium for 2025 came in at a whopping £537 – an increase of some 46 per cent. The only way she could contact Aviva to ask whether her excellent driving had
actually been taken into account was via a bot. As is the way with bots, it didn’t understand her query.
Frustrated, she found alternative cover with RIAS for just over £383 – a four per cent increase on what she paid a year ago.
Catherine says: ‘In theory, MyAviva is a great idea, and I like that it’s available to older drivers. We can demonstrate that we are roadworthy and fit to be behind a wheel.
‘But there has to be a quid pro quo in the form of a lower premium for good driving.’
To put a 46 per cent increase into perspective, the consultant Pearson Ham says motor premiums fell at the end of last year by an annual 16 per cent.
As Jim Royle of BBC’s The Royle Family might say: ‘MyAviva? My a**e!’