Key Takeaways
- • Saba Capital, holding approximately 29% of Baillie Gifford US Growth Trust, has nominated three board candidates (Jason Chen, Thomas H McGlade, and James Waterlow) for election at the trust's October annual general meeting, resuming its activist campaign against the £900m fund.
- • Saba is demanding a full 100% cash exit option at or near net asset value (NAV) for all shareholders, citing severe underperformance: USA shares have underperformed the S&P 500 by 88.4% over five years (79.1% on underlying investments).
- • The trust's board has urged shareholders to reject Saba's proposals and to take no action pending further announcements, signaling management's opposition to the liquidity event and potential sale.
- • Saba previously blocked a proposed merger between Baillie Gifford US Growth Trust and Edinburgh Worldwide Investment Company (EWI) after gaining board control at EWI in April; the two firms had offered a 40% cash exit as a compromise, which Saba rejected.
- • This marks Saba's third major escalation against USA following an unsuccessful takeover bid in February of the prior year and unexpected opposition voting at last year's AGM without nominating candidates.
Summary
Saba Capital Management, the New York-based activist hedge fund led by Boaz Weinstein, has escalated its campaign against Baillie Gifford US Growth Trust by formally nominating three director candidates for the trust's October annual general meeting. With a shareholding of approximately 29%, Saba has put forward Jason Chen, Thomas H McGlade, and James Waterlow as board nominees, seeking to gain influence over the £900m investment trust's strategy and governance.
The core of Saba's campaign centers on shareholder liquidity and performance concerns. The hedge fund is pushing for a full 100% cash exit option at or near NAV for all shareholders, arguing that USA has severely underperformed relevant benchmarks. According to Saba's filing, USA shareholders have suffered an 88.4% underperformance relative to the S&P 500 over five years, or a 79.1% lag when measured against underlying investments. Saba has characterized the current board as prioritizing Baillie Gifford's interests over shareholder returns, specifically referencing the fund manager's decision in the prior year to reduce its substantial stake in SpaceX ahead of significant valuation increases—a move Saba views as mismanagement of a valuable holding.
Baillie Gifford's board has responded by urging shareholders to take no action and await further announcements, implicitly rejecting Saba's demands. The trust's shares traded at a 7% discount to NAV in recent sessions, reflecting market skepticism about the board's strategy. This campaign represents Saba's third major push against USA management. The hedge fund previously launched an unsuccessful takeover bid in February of the prior year and voted against the re-election of directors at last year's AGM without putting forward alternative candidates.
Notably, Saba has already achieved board representation at Baillie Gifford's affiliated Edinburgh Worldwide Investment Company (EWI), where it won its proxy contest in April. When the two trusts proposed a merger as a potential resolution, Baillie Gifford offered USA shareholders a 40% cash exit as part of the deal structure, but Saba rejected this compromise proposal, demanding full liquidity instead. The rejection of the merger and Saba's continued activism signal fundamental disagreements between the hedge fund and trust management over both governance and capital allocation strategy.
The core of Saba's campaign centers on shareholder liquidity and performance concerns. The hedge fund is pushing for a full 100% cash exit option at or near NAV for all shareholders, arguing that USA has severely underperformed relevant benchmarks. According to Saba's filing, USA shareholders have suffered an 88.4% underperformance relative to the S&P 500 over five years, or a 79.1% lag when measured against underlying investments. Saba has characterized the current board as prioritizing Baillie Gifford's interests over shareholder returns, specifically referencing the fund manager's decision in the prior year to reduce its substantial stake in SpaceX ahead of significant valuation increases—a move Saba views as mismanagement of a valuable holding.
Baillie Gifford's board has responded by urging shareholders to take no action and await further announcements, implicitly rejecting Saba's demands. The trust's shares traded at a 7% discount to NAV in recent sessions, reflecting market skepticism about the board's strategy. This campaign represents Saba's third major push against USA management. The hedge fund previously launched an unsuccessful takeover bid in February of the prior year and voted against the re-election of directors at last year's AGM without putting forward alternative candidates.
Notably, Saba has already achieved board representation at Baillie Gifford's affiliated Edinburgh Worldwide Investment Company (EWI), where it won its proxy contest in April. When the two trusts proposed a merger as a potential resolution, Baillie Gifford offered USA shareholders a 40% cash exit as part of the deal structure, but Saba rejected this compromise proposal, demanding full liquidity instead. The rejection of the merger and Saba's continued activism signal fundamental disagreements between the hedge fund and trust management over both governance and capital allocation strategy.
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