Investment trust urges ministers to overhaul rules amid Saba ‘threat’

Baillie Gifford US Growth Trust, which owns shares in SpaceX, has written to City minister Lucy Rigby and Scottish secretary Douglas Alexander urging a major overhaul of investment trust rules to combat the threat of activist hedge fund Saba Capital. The letter, presented to City AM, comes as Baillie Gifford finds itself locked in a battle with Saba, the latter of which has amassed nearly a third of the trust's shares.

Saba, run by Boaz Weinstein, has become infamous for its long-running attacks on London-listed trusts, with Baillie Gifford the latest target over the past 18 months. In the letter, Tom Burnet, Baillie Gifford's chair, warned that without swift government action, more investment trusts will fall victim to such tactics, leaving ordinary savers who rely on them to suffer.

Saba attempted to wind down the Gore Street Energy Fund in September after a narrow vote against its discontinuation, but succeeded in ousting the board and chair of Edinburgh Worldwide Investment Trust in April. Saba has accused the trust of chronic underperformance, proposing a trio of executives for shareholders to consider for the board at the AGM on October 23.

Burnet argued that Saba's claims have not undergone scrutiny, and the trust has not been transparent about what it would do with the company if it gained control. Citing the Financial Conduct Authority's work on closed-end funds, Burnet called for stronger board independence and management of conflicts that arise when a significant shareholder takes control.

He urged ministers to make it easier for investors holding shares through intermediaries to vote in meetings, emphasizing that investment trusts are a "great contribution to Britain's prosperity."