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CEO Janus Henderson has criticized a US hedge fund trying to take over management of seven UK investment funds, describing it as “too aggressive”.
Ali Dibaj, who leads the $382 billion asset management firm, said Boaz Weinstein's Saba Capital was stepping in to try to manage the trusts “to take advantage of management fees.”
At Saba Capital She took shares in seven trust funds – Two of which are run by Janus Henderson – and are seeking shareholder approval to reform their boards and install their nominees.
“If you haven't seen what's happening in the world of investment funds in the UK today, please pay attention on behalf of your clients,” Dibbage told professional investors at Janus Henderson's UK Investment Conference in London on Wednesday.
“You have an irrational, very aggressive little… (that) hedge fund came in and decided to bet on you and your clients that they wouldn't vote, to take that money, and take advantage of the management fees.
“They are banking on complacency. Please, please do not become complacent, do not let them take over.” He added that the UK’s £266bn investment credit sector was in fact “under attack”.
“All these trusts have board members who are part of this ecosystem,” Saba Capital said. “Taking fees from retirees for what? They are supposed to work for you, the shareholders, and they themselves are sitting in other trusts that trade at similar discounts.”
“We are here to rehabilitate this broken set of trusts and . . . a broken industry that has not been able to grow.
Saba added that it was one of the largest supporters of investment funds and similar products in the world, investing $6.6 billion.
Debaj's comments come Saba's campaign is facing backlash. The trusts, which are also managed by Baillie Gifford, Herald Investment Management and Manulife, have raised concerns about Saba's plan to place its nominees on boards.
ShareSoc, the industry body for retail investors, also said on Wednesday that it “strongly opposes” Saba's proposals. The activist's plans “envision a lack of independent judgment and an incestuous and self-interested takeover of the trusts' investment mandates,” ShareSoc director Mark Northway said.
SABA has focused on the performance of the seven trust funds and the fact that their share prices are lagging the value of their assets.
The trusts she is targeting are: Baillie Gifford US Growth, CQS Natural Resources Growth & Income, Edinburgh Worldwide Investment, European Small Caps, Henderson Opportunities, Herald Investment and Keystone Positive Change. Hedge fund stakes range from 19 to 29 per cent of each trust and have a total value of £1.5 billion.
The UK investment trust industry has come under pressure from rising interest rates, regulation and a focus on fees, prompting some investors to exit.
Alan Brearley, an analyst at Investec, said it was time to “protect the barricades against any egregious and opportunistic attack, but also time for some introspection in the industry”.
