Many large investment trusts are run from Scotland, which has a proud history in this sector.
Edinburgh Worldwide Investment Trust, which is run by Baillie Gifford and had total assets of around £831.55 million at November 30, is facing a renewed attempt by US hedge fund manager Boaz Weinstein’s Saba Capital Management to oust all of its directors and appoint three US-based individuals nominated by Saba to its board.
Saba, which owns slightly more than 30% of Edinburgh Worldwide, has requisitioned a general meeting of the investment trust’s shareholders, which is being held on January 20.
Baroness Altmann said: “Edinburgh Worldwide Investment Trust’s retail and wealth management investors need to wake up now and vote if they want to protect their long-term interests against threats of a hostile takeover by US hedge fund Saba Capital.
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“The long-standing UK investment trust sector is under attack, as its long-term, patient-capital model is being challenged by the short-term [view] of overseas investors.”
She added: “UK investment trusts are one of the strengths of our financial system, channelling patient capital into innovative, long-term assets which open-ended funds often struggle to hold. But this model depends on boards acting for all shareholders, not just an aggressive minority with a short time horizon. They are ideal investments for pension funds.”
On February 14 last year, Edinburgh Worldwide became the seventh of seven UK investment trusts targeted by a Saba campaign to see off the US activist investor. The trust’s shareholders voted decisively against this previous attempt by Saba to oust the Edinburgh Worldwide board and take control of the fund.
Baroness Altmann said: “This renewed attack could herald similar actions against numerous other UK investment trusts in which Saba has taken stakes. There is a serious risk that EWIT’s retail investors do not realise what is happening and fail to exercise their vote. Allowing a determined hedge fund to keep returning to the register until fatigue or low turnout hands it victory is not healthy shareholder democracy.
“Under current rules, disruptive resolutions can pass unless enough other shareholders actively vote against them…I hope retail investors, wealth managers, pension trustees and regulators will consider the longer-term risks of allowing short-term trading interests to impact confidence in the closed-ended model’s traditional long-term investment approach that has served investors well over time.”
Independent voting advisers Glass Lewis and Institutional Shareholder Services are recommending Edinburgh Worldwide shareholders vote against all of the Saba resolutions. Heavyweight institutional investor Legal & General declared last week that it would be voting against all of Saba’s Edinburgh Worldwide resolutions.