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Britain’s Financial Conduct Authority has been embroiled in an increasingly vitriolic activist campaign targeting seven investment trusts amid growing concerns about the profits of retail investors.
The FCA has approached the largest retail investment site over its interactions with customers of seven investment trusts targeted by US activist hedge fund Saba Capital, according to people familiar with the matter. The regulator wants to ensure that shareholders are aware of any upcoming trust board votes.
FCA officials told Hargreaves Lansdown, Interactive Investor and AJ Bell how to warn customers holding mutual fund shares on their platforms, according to people with knowledge of the exchange. He asked her if she was doing so.
Saba, run by activist investor Boaz Weinstein, called on shareholders to vote to overthrow the trust’s board, saying the board had failed to hold investment managers accountable for poor performance. .
The campaign could lead to one of the biggest changes to the UK investment trust industry, a 150-year-old industry with £266bn of assets under management.
Saba is proposing its own director candidates, with the aim of ultimately taking over investment management of the trust currently run by Baillie Gifford, Janus Henderson, Herald Investment Management and Manulife. There is.
But the mutual fund industry has expressed concerns that retail investors may not vote, paving the way for Mr. Saba to take power. Mr Saba has stakes ranging from 19% to 29% in each trust, with a total value of £1.5bn. For Saba to win, he would need at least 50% of votes in each trust.
The FCA is closely monitoring the situation and is in close contact with investment platforms that handle communications with mutual fund investors, according to people briefed on the matter.
However, the rules governing votes to remove and appoint investment trust directors are set out by the Corporations Act, rather than the FCA’s rules, and the watchdog has so far said these are Determined to be an internal matter, the person added.
The industry’s trade association, the Investment Companies Association, has written to the FCA expressing concerns about protecting shareholder interests.
“With so much at stake, regulators cannot rely solely on people doing the right thing,” AIC chief executive Richard Stone said. “When significant changes to mutual funds are proposed, platforms should proactively contact customers to encourage them to vote.”
Mr Stone called on the FCA to review how board independence is determined under the listing rules. He said there was a potential conflict of interest with Saba taking control of the boards of both mutual funds and also seeking to become asset managers.
The seven trusts Saba is targeting are Baillie Gifford US Growth; Edinburgh’s global investments. Keystone positive changes. European SMEs. Henderson Opportunities; Herald Investments. CQS Natural Resource Growth and Income.
Hargreaves Lansdown and AJ Bell said they had written to the trust’s shareholders urging them to vote. Interactive Investor said it has taken steps to allow customers to vote. FCA declined to comment.
