A pair of investment trusts run by Janus Henderson have become the final two of Saba’s seven targets in the sector to respond formally to the US activist’s campaign to unseat their boards. 

The European Smaller Companies Trust (ESCT ) and Henderson Opportunities Trust (HOT ) joined peers in making unusually strongly-worded appeals to shareholders to vote against the US hedge fund firm’s proposals. 

James Williams, chair of £721m ESCT (in which the writer is a shareholder), said it was clear that Saba’s motives were ‘self-serving’, as it seeks to replace the board with two directors of its choice and, ultimately, appoint itself as fund manager.

‘This could endanger shareholder protections, radically alter the company’s investment risk profile, and deny investors the opportunity to benefit from the proven European small-cap investment strategy,’ said Williams in a market announcement today.

Saba has accused its targets of underperforming and, indeed, most have been in the last three years. 

But ESCT, which is the largest trust in its four-strong European smaller companies sector, stands out for beating its benchmark over that as well as most other time periods.

‘Saba’s claim that ESCT has underperformed is factually inaccurate,’ said the board.

Over the past three calendar years, ending 31 December, shareholders have enjoyed a 5.3% total return, according to today’s announcement. While there has been a 3.2% fall on a net asset value (NAV) basis, that still beats ESCT’s benchmark, which has been the MSCI Europe ex-UK Small Cap index for most of the period. 

Under Ollie Beckett, lead manager since 2011, that record of outperformance extends back a decade. 

The £92m Henderson Opportunities trust made similar objections to Saba’s plans to install its own directors and establish control of the trust, before possibly turning it into a vehicle, potentially after merging with other funds, to attack other investment companies trading at discounts. 

The board also provided full details on alternative plans – referenced for the first time publicly before Christmas but believed to have been in discussions behind the scenes for some time – to wind up the trust, which invests in UK companies of all sizes. 

Shareholders would face a choice of a cash exit at NAV or rolling over into the Janus Henderson UK Equity Income & Growth open-ended fund, which is run by the same management team of James Henderson and Laura Foll.

The directors emphasised those plans were ‘at risk of being cancelled by Saba’, which was offering more uncertainty to investors.

Chair Wendy Colquhoun said: ‘The board’s message to shareholders is clear: please exercise your vote and don’t let Saba take unnecessary risks with your money,’ 

ESCT and HOT have set the dates for their respective general meetings requisitioned by Saba for 5 February and 4 February.

The New York-based firm, run by Boaz Weinstein, is the biggest shareholder in both, holding a 28.4% interest in HOT, according to the latest disclosures. Its position in ESCT, which it has been building in recent months, is 29.4%.

Four of Saba’s other targets have also set dates for crunch shareholder votes, although Edinburgh Worldwide (EWI ) has been able to delay doing so and has not yet posted a shareholder circular, after Saba’s initial meeting requisition request was deemed invalid.

Saba subsequently responded to the pair of Janus Henderson trusts, saying both had traded at an average discount of aound 13.5% over the past three years. 

‘These respective double-digit discounts demonstrate that the trusts’ boards and portfolio managers have failed shareholders,’ a spokesperson said. 

The firm went on to attack Henderson Opportunities in particular.

The statement continued: ‘Janus Henderson’s proposed reconstruction scheme for HOT is inferior to our nominees’ plan and their claim that Saba would seek higher fees at shareholders’ expense if selected as investment manager is made up.

‘Do not be fooled – this scheme is simply a last-ditch attempt to protect the underperforming board, continue lining their own pockets with shareholder capital and distract from an indefensible track record.’