US hedge fund takes renewed aim at British investment trust

An American ‘activist’ investor is making its third attempt to change the board of a Baillie Gifford investment trust, potentially leading the way to a change of management and a radically new direction for the listed fund. The trust’s board is urging private savers to vote down the proposals in a ballot later this month.

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Baillie Gifford US Growth, whose holdings include Anthropic, OpenAI and SpaceX, will hold its annual meeting on 23 October, at which shareholders will be asked to choose its board of directors. The US activist, Saba Capital, wants investors to appoint three Saba-nominated candidates, while the trust’s current board has urged them to back the existing directors. Shareholders in the trust who hold their shares on the Fidelity platform and want to take part in the ballot need to cast their vote by 20 October. We explain the online voting process below.

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Early last year Saba attempted to change the boards of seven investment trusts, including Baillie Gifford US Growth, as we reported here. Later, it voted its own shares against the existing board of Baillie Gifford US Growth at last year’s annual meeting in October. Both of Saba’s first two attempts to bring about change at the fund were defeated in the shareholder ballots.

Saba currently owns 29.9% of the trust’s shares and may be supported by another American hedge fund, Sessa Capital, which owns 7.7% of the shares but has not said how it intends to vote. The trust’s board therefore expects the outcome to hinge on the willingness of the trust’s private shareholders to take part in the vote; if the previous ballots are any guide, the overwhelming majority of private shareholders who do vote will back the board.

Tom Burnet, the trust’s chair, said last month: ‘Since launch in March 2018, the annualised NAV total return ranks the [trust] among the top 10% of all UK-listed investment companies and all US equity open-ended funds and ETFs globally over the period. In short, [our] strategy is delivering, and exceptional opportunities are ahead.

‘But Saba wants to end this and is, again, making proposals which would compromise the independence of the board, seeking the appointment of three of its own nominee directors who may, if elected, pursue proposals that are designed to further Saba’s own interests at the expense of other shareholders.’

However, Saba countered: ‘Over the past five years, Baillie Gifford US Growth has underperformed the S&P 500 index on both a price (–88.4%) and NAV return (–79.1%) basis. During that time, shareholders have suffered under a board that has repeatedly put Baillie Gifford’s interests first. If our nominees are elected, we would urge them to offer all 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.’ Sessa Capital did not respond to a request for comment.

The trust’s stance has had support from City analysts. Alan Brierley of Investec, the bank, said: ‘Saba Capital offers no credible alternative. Shareholders are being asked to give its nominees potential control of the board without any roadmap for the future manager, strategy or governance: vote first, then find out later what you have voted for … We strongly recommend supporting the incumbent board, manager and strategy.’

Callum Stokeld of Panmure Liberum, in a note entitled ‘Not voting is a vote for Saba’, said: ‘With no details or proposals on how a post-vote vehicle may change, this [a Saba victory] would represent a step into the dark … it seems to us clear that, should the proposals pass, dissatisfied shareholders will have no exit mechanism other than open-market transactions. The exercise of shareholder democracy takes on increased importance, in this light, and we think it imperative that shareholders exercise their voting rights, however they choose to do so and however small or large their holding.’

How to vote

If you hold shares in Baillie Gifford US Growth via Fidelity, you can cast your vote online, although you will need to enable the service first if you have never used it before.

Log on to your account at fidelity.co.uk, then select ‘My accounts’ from the top-right menu bar and go to ‘Profiles’, select ‘Preference centre’ and then the ‘Shareholder voting & information’ tab. If necessary, turn on the service by clicking the tab from ‘Off’ to ‘On’.

Within two working days you’ll receive an email from a partner company, Broadridge. You will then be able to vote. If you are voting via our website for the first time, be sure to allow for the two days required for it to be up and running. Fidelity customers need to vote by 20 October.

Further questions?

Baillie Gifford US Growth has appointed a company called Georgeson to help shareholders with the voting process; email USA@georgeson.com or call 020 7019 7018. There is also more information on the trust’s website. Broadridge can be contacted via client.services@broadridge.com. Saba’s website is here.

The trust has asked platforms such as Fidelity to point out that shareholders who wish to vote in line with the board’s recommendations need to vote against resolutions 1, 2 and 3 and in favour of the others, and should therefore not use the “For All” or “Against All” voting buttons.

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. This investment trust invests in overseas markets and so the value of investments can be affected by changes in currency exchange rates. The shares in Baillie Gifford US Growth investment trust are listed on the London Stock Exchange and their price is affected by supply and demand. The trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. Before investing, please read the relevant key information document which contains important information about the fund. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.