CQS Natural Resources Growth & Income (CYN ) has become the latest trust to cross swords with Saba Capital, accusing the US hedge fund group of being ‘self-interested’ and ‘misleading’ in its attempt to oust the board.

The £127m portfolio of resources equities and debt was one of seven trusts against which Saba launched campaigns a week before Christmas, requesting general meetings. 

In an open letter, Saba boss Boaz Weinstein criticised the boards for their ‘inability to deliver sufficient shareholder returns’ and failure to narrow discounts which had ‘destroyed’ value for shareholders.

However, the trusts have come out fighting. CQS has joined Baillie Gifford US Growth (USA ), Edinburgh Worldwide (EWI ), Keystone Positive Change (KPC ) and Herald (HRI ) in making scathing assessments of Saba and its motives, while urging shareholders to vote against its proposals. 

Christopher Casey, CYN’s chair, said Saba’s measures to replace the board – installing Saba’s Paul Kazarian and another nominee, before appointing itself as manager and changing the investment mandate – were ‘without merit’. He added that they present a ‘significant risk to your investment and are not in the best interests of all shareholders’.

The board of the trust also refuted Saba’s claims of underperformance as ‘misleading’, pointing to the 167% net asset value (NAV) and 220% share price total return since 2015, when the current managers were appointed.

The trust is managed by Ian Francis, Keith Watson and Rob Crayfourd, who originally worked for CQS before it was acquired by Manulife last year.

In contrast, Casey said Saba had ‘failed to narrow’ the discounts of the closed-end funds that it has taken control of in the US, warning shareholders may become ‘trapped at a long-term discount’ should Saba take control of CYN.

‘[Saba’s] claims of the company’s underperformance are misleading, their proposals demonstrate a self-interested short-term focus, their track record is questionable and, if the requisitioned resolutions are passed, you may no longer be invested in a highly specialised natural resources investment trust with good governance and a clear strategy,’ said Casey.

The activist investor owns between 19% and 29% of the seven trusts it has targeted, with the majority of its stakes built via derivative swaps. Share ownership details reveal it owns a direct stake of 8.7% in CQS but controls 29.1% of the voting rights, making it by far the largest shareholder, when swaps are taken into account.

CYN’s board said it had already committed to offering investors a continuation vote each year as well as ongoing share buybacks to provide shareholders with liquidity, whereas Saba has failed to deliver details of its planned strategy and given no indication of how much cash would be returned to shareholders.

Casey said the board has ‘repeatedly attempted to engage’ with the New York-based manager but it has ‘declined to provide its strategy, despite its misleading claims that it “prefers private engagement with the boards of the trusts we invest in”’. 

The requisition by Saba comes as CQS implements an ongoing review of the trust. Casey said a number of options for the portfolio are being considered, including paying an increased dividend funded partly by capital growth, providing a full cash exit, or merging with another trust.

‘Importantly, the board believes that implementing any one, or any combination, of these options will represent a much better outcome for Shareholders as a whole, rather than accepting Saba’s proposals,’ said the announcement.

CYN’s latest continuation vote in December passed with more than 99% of votes cast in favour. 

However, the board highlighted the risk of a low turnout at the general meeting it has now set for 4 February, given that just 10.2% of shares voted at the December meeting. 

Baillie Gifford-run trusts US Growth, Keystone and Edinburgh Worldwide published strongly-worded statements urging investors to vote against Saba taking control of the trusts, while Herald and Saba have taken shots at each other in public announcements.

Saba defended itself against CQS, saying that Casey ‘cannot hide from poor performance’. 

‘Rather than be transparent about the trust’s underperformance, Mr Casey and CQS have instead resorted to making inaccurate, unsubstantiated claims about Saba’s track record, our nominees’ experience and their focused plan to deliver value for all shareholders,’ Saba said in a statement. 

The hedge fund manager also questioned Casey’s ‘dated’ experience of the natural resources sector given he ‘retired from the industry 15 years ago’.

‘His track record clearly puts shareholder value at risk,’ Saba said.

Weinstein’s firm added that its two closed-ended funds – known as BRW and SABA, according to their US tickers – have both ‘demonstrated comitment to providing liquidity, best-in-class governance and better management to enhance long-term value and protect shareholder rights’.

This piece has been updated with comment from Saba Capital Management.