Herald Investment Trust PLC on Thursday urged shareholders to vote against resolutions proposed by Saba Capital Management LP at the upcoming general meeting, citing the hedge fund‘s track record of underperformance and the potential for significant value loss under its proposed strategy.
Herald, a London-based investor in technology, media and communications companies, arguing that the open-ended timeline for the proposal could lead to significant value loss due to Saba’s ‘known selling appetite.’
Herald’s board noted that Saba’s proposal would not materialise for ‘at least a year’, during which time the portfolio’s value could be negatively impacted both in anticipation of, and as a consequence of, such selling activity.
Herald Chair Andrew Joy, Herald emphasised the trust’s strong historical performance, pointing out that since its inception in 1994, it has delivered a 2,611.6% NAV total return. He contrasted this with Saba’s track record.
‘Since Saba started investing in 2009, it has materially underperformed Herald. Since that date Herald has delivered a NAV total return of over 865%,’ said Joy.
Saba, a New York-based hedge fund founded by former Deutsche Bank banker Boaz Weinstein, has been campaigning to reconstitute Herald’s board as part of a broader push targeting management changes at seven UK-listed investment trusts.
The move has sparked a tit-for-tat war of words between Saba and the seven.
The other six trusts are Baillie Gifford US Growth Trust PLC, CQS Natural Resources Growth & Income PLC, Edinburgh Worldwide Investment Trust PLC, European Smaller Companies Trust PLC, Henderson Opportunities Trust PLC, and Keystone Positive Change Investment Trust PLC.
Saba argues that Herald’s shareholders have endured poor returns in recent years, including a 9.7% NAV loss over three years, despite performance from holdings such as Super Micro Computer – a company that experienced a huge surge, rising more than 300%.
The board rejected Saba’s claims. ‘Contrary to what Saba implies, as far as the Board are aware, none of these shareholders have expressed a wish for Saba to take over the management of the Company’, Herald’s response read.
Herald Investment Trust’s General Meeting is scheduled for January 22. Shares in the trust were down 0.7% at 2,488.20 pence each in London on Thursday afternoon.
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