Jonathan Simpson-Dent, chairman of Edinburgh Worldwide Investment Trust, one of seven being targeted by a New York hedge fund, has warned that it faces an “existential threat” from a New York hedge fund.

Mr Simpson-Dent says Saba Capital, run by Boaz Weinstein, intends to remove Baillie Gifford as manager and “take the company down an entirely different path”.

In a conference call with reporters, he accused Saba of wanting to make “a fast buck” and described the battle as “black versus white, a battle of principles”.

He said the trust wanted to focus on the long term, on “hidden gems and looking for transformative results. Saba could not be shorter term. It wants to harvest cash quickly.”

The EWIT board is “strongly” recommending that shareholders vote against Saba’s resolutions at a general meeting in Edinburgh on 14 February.

“We want shareholders to speak up. It is an important moment,” said Mr Simpson-Dent.

Saba has accused the trusts of underperforming. The trusts it is targeted are: US Growth, Edinburgh Worldwide and Keystone Positive Change – all managed by Baillie Gifford – as well as European Smaller Companies, Herald, Henderson Opportunities, and CQS Natural Resources Growth & Income. 

In a circular to shareholders, Mr Simpson-Dent, said: “Edinburgh Worldwide is run solely and independently for you, our shareholders. You have chosen Edinburgh Worldwide for its unique and early access to hidden gems, ground-breaking businesses which in many cases are not available on the public markets.

“Let’s not let Saba take that away. This is about consumer choice, allowing you the freedom to decide how, where and when to invest your money.

“I am deeply troubled by Saba’s proposals. Investment trusts are extremely democratic by construction – Saba’s proposals are not. Saba’s overt land grab for its own end game exploits our long-standing retail Shareholder base, who usually do not vote.”

He says Baillie Gifford has a long-term track record in the specialist arena of global smaller companies investing in both publicly traded and private businesses.

“The clearly differentiated strategy of Edinburgh Worldwide has delivered strong returns over the long-term,” he says. “Following a review of strategy conducted last year, which followed a difficult period from 2021 to 2023 as growth investing dropped out of fashion, the board of directors is confident that your portfolio is in good shape.

“Saba has timed its attempt to seize control just as the Trust is turning a corner – with Net Asset Value (NAV) having increased by 15.3% between 30 August 2024 and 31 December 2024.”

In notes accompanying today’s year-end figures he says the new year has started “with a better and more balanced portfolio, a top 10 underpinned by transformative businesses that include SpaceX, PsiQuantum, Alnylam, Axon and Aerovironment.

“With Luke Ward and Svetlana Viteva becoming co-managers alongside Douglas Brodie, we are confident that we have the right team and approach to achieve the company’s objective and deliver for shareholders.”

On the year’s trading, he said the trust had seen “the long-awaited start of Edinburgh Worldwide’s recovery.

“I am encouraged that our share price rose by 26.1% in the 12 months to 31 October 2024, with the company’s net asset value per share growing 12.8% and the discount narrowing from 17.4% to 7.6% over the period. The comparative index, the S&P Global Small Cap Index also rose strongly, registering a gain of 21.6% in sterling terms during this period.

This upward momentum has continued and accelerated through to the end of the calendar year with a further 23.6% increase in the share price and 13.3% in NAV between 31 October and 31 December 2024, when the S&P Global Small Cap Index rose by 2.5%.

Saba’s response

“After losing an astounding 43% over the last four years despite the rising equity market, EWI’s board and management should be embarrassed,” says Saba Capital.

“Chair Jonathan Simpson-Dent has failed to address the -13% average discount at EWI over the last three years, while at the same time co-manager Douglas Brodie has overseen a massive asset flight across several Baillie Gifford funds.

“EWI has underperformed its benchmark for the last three years and its recent uptick in total return appears to be largely driven by Saba’s buying – not due to investing in ‘hidden gems’ in the private markets or making improvements at the board or management level.”

In a webinar last week, Mr Weinstein made the following points:

* On EWI: “I want to do a forensic analysis on how it is possible that you lost so much money in a rising market.”

* On Saba’s Intentions in the UK Market: “We are here to not just buy your trusts, we are here to buy billions more and rehabilitate this broken set of trusts and what is – in some ways – a broken industry that hasn’t been able to grow.”

* On SpaceX: “This is a box full of rocks and we’ll open that box, sell things that we think should be sold, if we are entrusted to be the manager. Our base case is to keep SpaceX… investors seem to want it. We would like to give them what they want, and we would sell those things that have caused so much pain, and would replace them by investing back into the UK…”

* On Performance and Saba’s Alignment: “This discount is not some ephemeral thing. It is costing mom and pop investors in these trusts enormous amounts of money year in and year out. We are on the same side as you. We are invested alongside of you.”

* On Current Boards: “All of these trusts have board members that are part of this ecosystem of greed, taking fees away from the pensioners for what? They are supposed to work for you, the shareholders, and they themselves are sitting on other trusts trading at similar discounts.”

The general meeting takes place at Baillie Gifford’s offices in Edinburgh at 11.45am on 14 February.