Ros Altmann, a prominent figure known for her tenure as a former Pensions Minister, now serves in the House of Lords.

The investment trust sector is facing significant challenges, and ordinary shareholders should be alert as time is of the essence. The Edinburgh Worldwide Investment Trust is under threat from a potentially hostile takeover by the US hedge fund Saba Capital, and its investors need to take action promptly to safeguard their long-term interests.

Shareholders should be aware that the voting deadline is set for January 17. Those holding shares through online platforms might need to notify their platforms earlier, so it’s crucial to reach out to them and take necessary steps without delay. The key meeting for shareholders is scheduled for January 20.

The enduring, patient-capital approach of trusts like Edinburgh is currently being tested by the short-term perspectives of foreign investors, hedge funds, and private equity firms. This shift poses a substantial threat to the traditional model that has long benefited the industry.

Investment trusts in the UK are a cornerstone of our financial infrastructure, representing a significant portion of the FTSE250. Investors need to recognize their value and act decisively to maintain the stability and integrity of these financial instruments.

Lady Altmann:  The investment trust model depends on boards acting for all shareholders, not just an aggressive minority with a short time horizon

UK investment trusts are one of the strengths of our financial system, making up one third of the FTSE250.

They have been successfully channelling patient capital into innovative, long-term assets which open-ended funds often struggle to hold.

They are ideal investments for pension funds and retail investors who could not access these investments efficiently themselves. 

But the investment trust model depends on boards acting for all shareholders, not just an aggressive minority with a short time horizon.

Saba intends to sack EWIT’s entire board and replace it with three ‘independent’ candidates of its own choosing, although one has to question how they can be independent if they are chosen by Saba.

The candidates do not appear to collectively match the relevant experience of the current board.

This seems like the same game as before – gain control of the board, and thus the assets of the trust, then have freedom to pursue Saba’s agenda to profit from taking control.

Retail investors and all other shareholders need to assess the threats and opportunities they are facing and use their vote.

Saba is back on the attack after it failed, last year, to take over seven UK investment trusts, to remove their boards and install its own nominees.

The hedge fund was banking on the inertia of the high proportion of retail shareholders who make up the investment trust register, many of whom have traditionally not voted on corporate actions.

Thankfully, galvanised by the media and the sheer self-interested audacity of the proposals, shareholders turned out in numbers to reject the bids.

This new assault 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.

Boaz Weinstein: Founder and chief investment officer of Saba Capital Management

Allowing a determined hedge fund to keep returning to the register until low turnout hands it victory is not healthy shareholder democracy.

Under current rules, disruptive resolutions can pass unless enough other shareholders actively vote against.

Given the Financial Conduct Authority’s Consumer Duty rules to protect retail investors from foreseeable harm, the regulator should ensure attempts like these, to remove the board, must be approved by well over 50 per cent of shareholders, rather than the simple majority required now.

In this context, regulators also need to ensure platforms are doing enough to properly inform their clients and make voting as simple as possible.

For now, if EWIT’s shareholders have doubts as to whether this takeover would be in their interest, they need to make their voice heard again and exercise their right to vote.

Shareholders in other investment trusts also need to be vigilant to protect their long-term interests against raiders who may be more interested in short-term profit than long-term success.

Hopefully retail investors, wealth managers, pension trustees and regulators will consider the longer-term risks of allowing short-term trading interests to impact confidence in investment trusts.

The closed-ended model’s traditional long-term investment approach has served investors well over time.

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