Saba turns its sights on Baillie Gifford US Growth
On 24 August, Saba Capital requisitioned a board shake-up at Baillie Gifford US Growth Trust (USA), where it holds around 29% of shares, nominating Jason Chen, Thomas H McGlade and Sir James Waterlow for election at the forthcoming AGM and urging the nominees, if elected, to offer shareholders a 100% cash exit at or near NAV. The board has urged shareholders to take no action for now.
The precedent from Saba’s earlier campaigns is mixed. Its nominees took control of Edinburgh Worldwide’s board in April, though Baillie Gifford remains investment manager for now (as of end-August). By contrast, the Saba-backed board at Impax Environmental Markets served notice on Impax Asset Management in July and launched a process to identify a new manager or strategic alternative. A management review at USA is therefore possible if Saba’s candidates are elected, but it is not a foregone conclusion. A parallel battle is under way at Gore Street Energy Storage Fund, where Saba is pushing for the trust to discontinue and move towards a wind-up. With Saba holding around 17% and RM Funds, which has backed the resolutions, holding a further 4.8%, the two investors account for nearly 22% of shares. Gore Street's board argues the proposals risk destroying value ahead of the 16 September AGM vote.
On 3 August, seven Aberdeen-managed investment trusts entered into three-year agreements with abrdn Fund Managers and Saba, implementing the wider standstill arrangement announced by Aberdeen in May. The agreements restrict Saba from requisitioning resolutions or general meetings, seeking board changes or attempting to control or influence the companies during the standstill period, subject to the detailed terms of each agreement.
Pacific Assets and Schroder Asian Total Return merger nears completion
Schroder Asian Total Return (ATR) and Pacific Assets (PAC) have published circulars to implement their merger, structured as a Section 110 reconstruction and members' voluntary winding-up of PAC. PAC shareholders can roll into ATR at a formula asset value (FAV)-for-FAV exchange ratio or elect for cash, with the cash option capped at 25% of PAC shares and subject to a 2% discount. PAC has also declared a 3.8p pre-liquidation interim dividend, payable on 18 September to all shareholders on the register at 28 August, subject to the relevant scheme resolutions being approved.
The enlarged vehicle offers PAC shareholders a stronger performance record, a 5% discount-control ambition backed by buybacks and a larger marketing platform, alongside lower running costs. ATR's ongoing charges are expected to fall to about 0.66% from 0.80%, with the base management fee set at 0.65% on the first £500m and 0.50% above that, calculated on the lower of NAV and market capitalisation; the overall fee cap will fall from 1.25% to 1.15% of NAV. PAC directors June Ang and Edward Troughton will join the ATR board. Under the current timetable, PAC shareholders have until 1pm on 16 September to submit election forms, PAC shares will be suspended from 17 September, new ATR shares will begin trading on 25 September and cash consideration will be paid no later than 10 business days after the 24 September effective date.
Regulation: FCA reforms overlap with the activist debate
The Financial Conduct Authority’s (FCA’s) consultation on changes to the closed-ended investment fund listing rules closed on 14 August, with proposals covering stronger board-independence safeguards, consistent protections around manager remuneration and fees, and explicit recognition of the conflict that can arise when a 20%+ shareholder is also seeking to become investment manager – a dynamic the sector has become well acquainted with this year. The AIC's response of 13 August backed the direction of travel but argued the protections should go further, calling for any substantial shareholder seeking the management contract to secure approval from a majority of the other shareholders and objecting to the proposed four-week delay before the new rules take effect.
Separately, and unrelated to investment companies specifically, the FCA’s broader IPO reforms took effect on 5 August. The changes removed the previous seven-day waiting period between publication of an approved registration document or prospectus and connected research, as well as the requirement for companies publishing connected research to share the same information with a range of unconnected analysts. Companies can still engage unconnected analysts voluntarily. The reforms could reduce friction in the UK IPO process and, at the margin, make it easier for new closed-ended vehicles to come to market.
Capital-raising and share issuance activity
Tritax Big Box announced on 6 August that it had successfully raised around £350m to help fund its enlarged data centre development pipeline. The real estate investment trust has secured an additional 235MW of grid connections, nearly doubling secured power to 507MW, while planning permission at Manor Farm in Slough adds another major data centre opportunity. Its half-year results showed operating profit up 6.1% to £152.9m and net rental income up 16.2% to £173.3m. Meanwhile, BlackRock American Income Trust is seeking shareholder approval at a 14 September general meeting to allot or sell from treasury up to around 30% of its issued share capital on a non-pre-emptive basis, a 10pp increase on the authority granted in July. Strong demand has kept the shares at a premium to NAV; since the July meeting, the company had sold 7,065,000 shares from treasury by 21 August, raising around £19.9m.
