European Smaller Companies (ESCT ) investment trust manager Ollie Beckett is ‘confident but not complacent’ about the fight against Saba Capital and urges investors to vote to protect their exposure to Europe.

Janus Henderson’s Beckett (pictured above), who has managed the £695m portfolio since 2011, said the requisitioning of a general meeting by the New York activist came as a surprise to him and the shareholders he has spoken to given the fund’s performance track record.

Saba has even admitted that ESCT is the only trust of the seven it is targeting that has delivered outperformance for shareholders over three years and, indeed, most periods. 

‘I have delivered for shareholders more than 200% in 10 years, and that is 64% more than the benchmark [the MSCI Europe ex UK Small Caps index],’ said Beckett. 

‘It is similar over five years... Performance is good and Saba has admitted that.’

Citywire was speaking to the Janus Henderson manager on Wednesday morning, hours before it was revealed that Saba had decisively lost the first of its shareholder votes against fellow target Herald (HRI ). 

During 2024, including dividends reinvested, ESCT shareholders enjoyed an 8.2% return, though net asset value (NAV) fell 1%, in line with the loss for the benchmark, according to the latest factsheet. 

Over three years, in a challenging period for European equities, shareholders have seen a 5.3% total return. The underlying portfolio fell 3.3% in value but was ahead of the benchmark’s 7.4% decline. 

Beckett, who is Citywire A-rated for the portfolio’s performance, acknowledged there has been ‘some discussion over the discount’.

In a webinar last week, Saba boss Boaz Weinstein criticised his seven trust targets for overseeing long periods where discounts have been persistently wide.

ESCT has a discount of 8.7% to NAV currently, but it has averaged 10.5% over the past year, with Saba taking some credit for that narrowing.

Beckett said the board has ‘put measures in place’ to reduce the discount. These measures include proposing a three-year performance-related tender for up to 15% of the shares at a 2% discount to NAV, to run alongside its active buyback programme.

Saba, for its part, says that and responses by other boards would not have happened without its involvement.

Beckett noted discounts have broadened out across the investment trust industry due to the consolidation among wealth managers – key backers of the sector – but said shareholders are not looking at discounts alone.

‘Shareholders care about whether we have made them money,’ said Beckett. ‘We have beaten the benchmark and done a good job. We have done our best and delivered a decent outcome.’

To prove he is correct, however, he needs shareholders to vote to stop Saba from replacing the board, before probably setting itself up as manager and changing the mandate.

Beckett urged shareholders to vote at the general meeting on 5 February or via their investment platform, which will have an earlier deadline for voting.

‘We have a large retail shareholder base and need them to mobilise,’ said Beckett. ‘I am confident but not complacent [about the vote], but people do need to vote to keep their exposure [to European smaller companies].’

Turnout at the Herald vote yesterday was more than 80%, higher than many expected, indicating the board’s attempt to reach retail investors was successful. 

If Saba does win upcoming votes, there is a possibility it could merge the trusts it takes control of, scrap the original investment strategies and use them as a vehicle to pursue other discounted trusts.

Beckett said his shareholders have ‘chosen to invest in European small caps and that is what they want active exposure to’, adding that the strategy has ‘been very good for them’ over the long term.

While there are other trusts in his sector, Beckett said ESCT was ‘distinctive because it is a true small-cap trust’ with a leaning towards the value investing style. 

‘We are valuation aware and in the event of an improving economic environment, being lower down the market cap and being valuation aware is a benefit,’ he said. ‘I don’t think now is the time to move away from Europe.’

He added that small-cap valuations in the region were at a ‘20-year low to their large-cap counterparts’.

Even newly inaugurated US president Donald Trump, who has threatened punitive trade tariffs, will eventually be a positive for the fund, in Beckett’s view. He said everyone was expecting a ‘worst case scenario’ from Trump taking office again but that is already ‘reflected in low valuations’.

‘Europe has always been a bit of shambles but we just need to find a few good companies to invest in,’ he said.

‘Trump brings volatility but the direction of travel will be positive. European small caps are geared to global growth and that is going to get better. And with historically low valuations and a portfolio that is cheaper than the market, we are in a good place and I am excited about the opportunities.’