Make sure your investment trust vote is counted in light of ongoing controversy

Saba and its founder, Boaz Weinstein, are proposing to replace the existing boards on all seven trusts with just two directors – one of whom will be nominated by Saba and the other will be an employee of the firm.

Saba is also looking to appoint itself as the fund manager of the trusts and utterly transform their investment strategies. It has been indicated that Saba may merge all seven trusts together and use this “mega-trust” to invest in other investment companies that are trading at a discount.

Given that boards are supposed to act independently of the fund manager and uphold the interests of shareholders, Saba’s proposals raise some obvious questions about how conflicts of interest will be managed. Can a board of two Saba-backed directors be independent?

Just as importantly, the proposals would fundamentally change the risk and reward of the investment. Investors would no longer have the exposure they had originally sought – for example, US growth companies.

Saba has requisitioned general meetings to vote on these proposals, which is one of the important attributes of investment trusts – shareholders ultimately get the final say on what changes are allowed.

But this only works if shareholders turn up. All seven of the trusts being targeted have a large proportion of ordinary private investors who typically do not vote.

This is not that surprising for a number of reasons, all of which need addressing.

Firstly, most investors buy their investments through platforms such as Hargreaves Lansdown or AJ Bell, among others. But, typically, investors must actively “opt in” to receive updates about actions such as annual general meetings and important votes.

Let’s face it, few people opt to receive more emails, but on issues such as this keeping up to date is vital.

We think that investors should automatically be opted in. This small change would help to keep investors more informed about vital changes to the way their money is managed.

Secondly, the voting process should be simple and accessible – ideally, a couple of taps on a mobile phone.

But, under the current systems, investors must log on to their platforms on a computer, find the updates – if they have them – sometimes phone their platform, and be sure to cast their votes several days in advance of the actual meeting. All of which is more time consuming and confusing than it need be.

The voice of ordinary shareholders will determine the outcome for these trusts. Failure to vote could inadvertently hand control to Saba and leave investors holding shares in a trust where the board lacks independence and there is uncertainty about investment strategy, cash exits, and fees.

It was encouraging to see shareholders of the Herald Investment Trust vote against Saba’s proposals on Wednesday. This is a victory for shareholder democracy.

As there are six other trusts with votes just around the corner, it’s vital that all shareholders vote.

It is essential that shareholders do not sleepwalk into a situation where an opportunistic investor is able to make decisions which could fundamentally change their investments. All investors should make sure they are informed and vote as a matter of urgency.