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American activist Saba Capital has failed in its attempt to oust the management of investment trust Herald, striking the first blow in his campaign against seven closed companies listed in the UK.
A majority of Herald shareholders voted against the US hedge fund’s proposal on Wednesday to oust the foundation’s board of directors and install its own nominees, which could have paved the way for Saba to become the investment manager.
More than 65 percent of the votes cast were against Saba’s plans, according to an announcement made by the Herald to the market. In addition to the votes for Saba, which accounted for almost 35 percent, a further 0.15 percent were in support.
Andrew Joy, chairman of Herald Investment Trust, said the result represented “a clear, complete and irrefutable rebuttal of Saba’s attempt to take control of your company and change its strategy against the wishes and interests of non-Saba shareholders”.
Joy said shareholders invested in Herald because they wanted to support smaller technology companies for the long term, noting that they “didn’t want to be deprived of the opportunity to enjoy more of the same” and “were not investing in Herald to become part of a short-term trading strategy”.
Saba, led by an activist investor Boaz Weinsteinlast month he called shareholder meetings at seven London-listed investment trusts, claiming their boards had failed to hold managers accountable for poor performance.
The campaign marks one of the biggest shake-ups of Britain’s 150-year-old investment trust industry, which manages £266 billion.
Saba’s defeat against the Herald’s management comes just one day after the hedge fund agreed to stop his activist fight against 50 BlackRock funds in exchange for a tender offer for two of them.
A large proportion of Herald’s shareholders are institutional investors such as wealth managers, with individuals making up less than a fifth of the register.
But the investment trust industry has warned that individual investors, who make up a larger share of the shareholder base of the other six trusts, are less involved in voting than institutions.
Jonathan Simpson-Dent, chairman of Edinburgh Worldwide, another trust targeted by Saba, said “this is just the first battle in the war against the seven trusts” and warned that “shareholders cannot be complacent”.
The British financial regulator has contacted investment platforms to ensure retail investors are aware of upcoming votes.
Saba’s holdings in each of the trusts range from about 19 to 29 percent and total £1.5 billion.
Saba said in a statement that it “remains committed to putting shareholders’ interests first, delivering returns to trusted UK investors and ultimately recovering this broken sector”.
It added: “We call on the shareholders of the six other trusts where we have requested general meetings to support Saba’s decisions to put these trusts on a path to meaningful value creation.”
