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Merryn and John Discuss the Showdown Between Saba and Investment Trusts · Merryn Talks Money

0:02
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Meren
0:20
Speaker 1: Talks Money Weekly rounder, our debrief on the biggest stories
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Speaker 1: in markets and economics and' Merenthum's that web editor in
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Speaker 1: Larnch for Bloomberg UK Wealth and.
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Speaker 2: I'm joined the Seniors Report and author of the Money
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Speaker 2: Distilled newsletter.
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Speaker 1: Right now, when we say the stories this week, we
0:37
Speaker 1: don't really mean the stories. We mean the story because
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Speaker 1: there is only one. Well in our little niche and
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Speaker 1: our little niche, there is only one and that is
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Speaker 1: what's going on in the UK investment trust industry now.
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Speaker 1: Earlier this week, John spoke to Boas Weinstein, chief investment
0:53
Speaker 1: officer and founder of Saba Capital Management. If you haven't
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Speaker 1: listened to that episode, go and listen to it because
1:01
Speaker 1: it sets us up for what we're going to talk
1:03
Speaker 1: about today. In a nutshell, Weinstein and his firm Suba
1:07
Speaker 1: Capital are attempting to take control of seven UK investment
1:11
Speaker 1: trusts because they're trading on high discounts. Have been trading
1:15
Speaker 1: on high discounts, then has the value? Maybe their returns
1:18
Speaker 1: have been a little rubbish, maybe the governance is all
1:20
Speaker 1: it should have been, etc. So they want to take
1:23
Speaker 1: control of these of these trusts. We're going to talk
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Speaker 1: about what that means and why maybe they should maybe
1:28
Speaker 1: they shouldn't.
1:28
Speaker 2: Too knows.
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Speaker 1: Anyway, since we published that podcast with Weinstein, some of
1:34
Speaker 1: the trusts that is looking at have contacted us and said, look,
1:37
Speaker 1: do you know what this isn't all right? He said
1:39
Speaker 1: some stuff that maybe misinformation, maybe not information. We don't
1:43
Speaker 1: agree with what he says about this. We don't agree
1:44
Speaker 1: with what he said about that. So we want to
1:46
Speaker 1: have our say. Now, we can't have all seven chair
1:49
Speaker 1: people of those trusts on where we could be kind
1:51
Speaker 1: of chaotic and slightly carnage like. So John and I
1:55
Speaker 1: are going to run through all the concerns that everybody
1:59
Speaker 1: has and try and come to some kind of conclusion
2:02
Speaker 1: towards the end. Now, one thing I want to add
2:04
Speaker 1: before I do that is that regular listeners will know
2:07
Speaker 1: that I am on the board of a couple of
2:10
Speaker 1: UK listed investment trusts. Neither of these trusts are on
2:13
Speaker 1: saba's lists, so it's not relevant, but there is, you know,
2:16
Speaker 1: that's out there. I've got some skin in the investment
2:18
Speaker 1: trust game. I don't think I'm conflicted anywhere, but you know,
2:20
Speaker 1: I'll leave that up to you now, you know, right, John?
2:24
Speaker 1: Do you know what I think?
2:25
Speaker 2: Boy? Do you think? Man? I think I've had.
2:28
Speaker 1: Too many emails on this.
2:30
Speaker 2: Sorry, Like I love that they sent them all to you.
2:34
Speaker 2: This is a great thing of it, like being able
2:37
Speaker 2: to kind of just come on, do an interview, chataway.
2:41
Speaker 2: Is someone rail everyone up and then you get all
2:43
Speaker 2: the complaints. It's fantastic. It's like Bitcoin all over again.
2:46
Speaker 1: It is Bitcoin all over again. And you know, a
2:49
Speaker 1: couple of people would like me to do something about you,
2:51
Speaker 1: like the Bitcoin people would like you to do something
2:53
Speaker 1: about me. So I'm not going to do anything about
2:55
Speaker 1: you as long as you don't do anything about me.
2:57
Speaker 2: I think that sounds like a good deal.
3:00
Speaker 1: Okay. The other thing I think is that I've got
3:03
Speaker 1: so many windows open on my desktop looking at this.
3:06
Speaker 1: There are so many different views, And do you know
3:09
Speaker 1: what I really think? In the end, No, everybody's right. Absolutely,
3:15
Speaker 1: everybody is right. Everybody who has written to me, everybody
3:19
Speaker 1: who's telephoned me, contacted me on LinkedIn, abuse me on Twitter.
3:24
Speaker 1: Everybody has a point about this. It all comes down
3:28
Speaker 1: to do you think it's reasonable for an investment trust
3:32
Speaker 1: to trade it a discount. Do you think long term
3:34
Speaker 1: is three years or do you think long term is
3:36
Speaker 1: five years? What do you think a reasonable fear fears?
3:39
Speaker 1: What does governance really mean to you?
3:41
Speaker 2: Etc?
3:42
Speaker 1: Etc. Do you think that the investment trust industry is
3:45
Speaker 1: such an important part of the UK investment and finance
3:49
Speaker 1: ecosystem and in particular maybe even the startup ecosystem, that
3:53
Speaker 1: it should be somehow protected in a way that other
3:56
Speaker 1: companies aren't, etc. And there are great arguments on both
3:59
Speaker 1: sides for them. Now, on the same day that we
4:01
Speaker 1: released your fascinating chat by the way, with their birds,
4:04
Speaker 1: one them, would you actually like to have my job?
4:06
Speaker 2: You do this really well? I know I couldn't possibly.
4:10
Speaker 2: I mean, for start, I mean start getting some of
4:11
Speaker 2: the complaints dayrectly.
4:13
Speaker 1: Ah, that'll always come to me anyway. The same day
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Speaker 1: that we put that out, Burzwinstein also had his own
4:20
Speaker 1: webinar where he talked for over an hour about why
4:24
Speaker 1: he's doing and what he's doing, and quite rude about
4:27
Speaker 1: a lot of people, quite rude about a lot of directors,
4:30
Speaker 1: very rude about quite a few fun managers. And he
4:32
Speaker 1: talks a lot about about things that you know, not
4:35
Speaker 1: not everything he said, with the stuff that I would
4:37
Speaker 1: have agreed to. You talk about the principal agent problem,
4:40
Speaker 1: about how the manager is the agent and in all
4:42
Speaker 1: these trusts the manager has a mistake and no skin
4:44
Speaker 1: of the game, and the manager is there to protect
4:46
Speaker 1: the assets, et cetera. All true, but that's what the
4:49
Speaker 1: board is there for. The board represents the principal and will.
4:53
Speaker 1: Boards don't in the main own very many shares relative
4:56
Speaker 1: to institutions, because boards are individuals, right. So if you
4:58
Speaker 1: own ten pounds, twenty pounds, thirty thousand pounds, and in
5:01
Speaker 1: some cases much more of a trust, you've got put
5:04
Speaker 1: a reasonable bit of your personal money in it. But
5:07
Speaker 1: obviously it's nothing compared to what the institutions might have.
5:09
Speaker 1: So it's skin in the game, but not in an
5:11
Speaker 1: institutional kind of way. So there was some confusion that
5:14
Speaker 1: irritated me a little. Got to say boas this did
5:16
Speaker 1: irritate me, confusion between the manager and the board. And
5:19
Speaker 1: I think in my experience of this sector anyway, that
5:22
Speaker 1: boards are very good at remaining independent from the fund managers.
5:26
Speaker 1: So that irritated me a little. But I did you know,
5:29
Speaker 1: I got that general idea that in the main what
5:33
Speaker 1: a fund manager wants to do is hang onto assets.
5:35
Speaker 1: That's what they want. You know, most big fund managers
5:38
Speaker 1: are asset gatherers. They want to get money, keep money,
5:41
Speaker 1: take the fee on that money. And in that sense,
5:43
Speaker 1: investment trust are very good for fund managers because that
5:46
Speaker 1: money is trapped, unlike an open ended fund where that
5:49
Speaker 1: money is not trapped. Investment trust are great because they
5:52
Speaker 1: just sit there little pool of permanent capital. Take your
5:54
Speaker 1: fee every year. So you know, that's one thing he
5:56
Speaker 1: said that really made sense. It also makes sense to
5:59
Speaker 1: say that the trust to your targeting, you do have
6:01
Speaker 1: horrible performance over three years, horrible And if your time
6:04
Speaker 1: frame is for three years, and you would certainly look
6:06
Speaker 1: at some of the baby gifted stuff and you get
6:08
Speaker 1: why on earth am I holding this? Why can't they
6:10
Speaker 1: make it better? Why have they lost forty fifty percent
6:13
Speaker 1: of my money over three year? This is horrible Because
6:15
Speaker 1: if you look at it longer term, not so horrible.
6:17
Speaker 1: And if you approve the strategy, then you know you're
6:19
Speaker 1: going to give it another four or five years before
6:21
Speaker 1: you start to lose your temper.
6:23
Speaker 2: Yeah, I mean, I do think and certainly from a
6:27
Speaker 2: conversation in the interview. But I did make the point
6:30
Speaker 2: that the last three years, particularly that's when interest rates
6:34
Speaker 2: started rising, there are good micro reasons why performance would
6:38
Speaker 2: be specifically bad over this time period. And I also
6:40
Speaker 2: think if you are quite careful about the starting date
6:43
Speaker 2: that you choose, you know, you can choose a date
6:45
Speaker 2: before the big sale of Hartens, so you can make
6:47
Speaker 2: it look even worse than it is. I mean, that's
6:50
Speaker 2: one thing you notice whenever you're messing around with chats
6:53
Speaker 2: on the Bloomberg term, know that if you change the
6:54
Speaker 2: starting date, it can make a substantial difference, even though
6:58
Speaker 2: you're broadly making the same sort of point. So I
7:02
Speaker 2: did sort of say, I said, you know, so what
7:03
Speaker 2: but this three year thing? And he said, go, you said,
7:05
Speaker 2: you're a very you're a very forgiven investor. So I
7:09
Speaker 2: started thinking, you know, in the hedge find world, three years,
7:14
Speaker 2: where as in the investment transport three years is a
7:16
Speaker 2: relatively short time for him.
7:19
Speaker 1: Yes, yes, And I do think, by the way, everybody
7:21
Speaker 1: that's going in and watching and obviously listen to John's
7:24
Speaker 1: podcast first, but then do go and watch both Mindstone speaking,
7:28
Speaker 1: because uh, you know, there's a lot to argue with,
7:31
Speaker 1: but there's a bit what he says. And you know,
7:33
Speaker 1: I'm sorry about this. I don't want to repeat things
7:36
Speaker 1: that make people feel a little sad. But he says
7:38
Speaker 1: to Bailly Gifford, aren't you embarrassed? Aren't you embarrassed? And
7:43
Speaker 1: you know this is very feisty stuff. Bailly Gifford is
7:47
Speaker 1: one of the one of the big and most respective
7:50
Speaker 1: fund managers in the UK, and he pulled out their
7:52
Speaker 1: three years performance and nically it looks over three years
7:55
Speaker 1: in a couple of places, and he says, look, aren't
7:57
Speaker 1: you embarrassed by this? Look what you've done. Look how
8:00
Speaker 1: much money you have lost your investors. And you know
8:04
Speaker 1: that is it's potent stuff. It's true because this is
8:06
Speaker 1: real money. If you invested at the top, that's real
8:10
Speaker 1: money that you work for. That you said, and it's gone,
8:13
Speaker 1: it's gone, And this should be a response to that.
8:16
Speaker 2: I agree, and I think that either well, you can,
8:21
Speaker 2: you can have discussions and make excuses and all the rest.
8:24
Speaker 2: And again it's always possible to do that. At the
8:27
Speaker 2: end of the day, the job the fund managers fundamentally
8:31
Speaker 2: is to look after their customers money and make more
8:34
Speaker 2: of it in the fundamental favor of all of these
8:37
Speaker 2: trustes that none of them are necessarily you know, they're
8:41
Speaker 2: not benchmark huggers. But the problem is, if I mean
8:45
Speaker 2: doing there is a fair point where if you've been
8:47
Speaker 2: sort of viewed as a techie growthy fund in the
8:50
Speaker 2: last you know, three years and you still struggled to
8:54
Speaker 2: you know, come up to the S and P, especially
8:56
Speaker 2: if most of your investments are in the US, then
8:59
Speaker 2: that is train out how to explain that. We leasily
9:03
Speaker 2: if you'd been putting all your money in an S
9:05
Speaker 2: and P five hundred passive tracker with the rest of
9:07
Speaker 2: the population over this time period, and you do probably
9:10
Speaker 2: have a rate to feel a little bit faired up.
9:13
Speaker 1: So there is this key thing here. There is a
9:16
Speaker 1: problem in the sector. A lot of the discounts in
9:18
Speaker 1: the investment to respector they have become structural. They're there
9:22
Speaker 1: and they haven't gone away in three years is too long.
9:25
Speaker 1: And we did have and I'm sure that everyone in
9:27
Speaker 1: the industry will have read it. There was Alan Briley
9:31
Speaker 1: of Investor put out a note last year where he
9:33
Speaker 1: pointed out that this stuff is beginning to be a problem.
9:37
Speaker 1: He said it wasn't last yearously it was a year
9:38
Speaker 1: before October twenty twenty three, and I remember it coming
9:41
Speaker 1: out and him saying, look, we've got an end of
9:45
Speaker 1: cycle challenge here. There are various exceptional events going on,
9:48
Speaker 1: but this is a perfect storm and it comes with
9:51
Speaker 1: some self inflected wounds and you lot have got to
9:55
Speaker 1: do something about it. You haven't responded fast enough to
9:58
Speaker 1: all sorts of things. There's discounts of multi years highs.
10:01
Speaker 1: There's blood in the water. This is going to attract
10:04
Speaker 1: arbitra's and it's going to attract corporate buyers unless you
10:07
Speaker 1: do something about it. You have got to do something
10:09
Speaker 1: about your discounts to get out there, create tenders, buy
10:13
Speaker 1: back properly, make sure these discounts come down to levels
10:17
Speaker 1: where you are not going to be attacked. And of
10:19
Speaker 1: course the sector did not react fast enough, did not
10:22
Speaker 1: react fast enough that advice from his vest a couple
10:25
Speaker 1: of years ago. And here we are, So is there
10:28
Speaker 1: a problem, yes, Does the investment trust sector needs to
10:31
Speaker 1: find a way out of that problem? Yes? But is
10:37
Speaker 1: saba the answer? Is Sabah the answer the solution to
10:41
Speaker 1: that problem? And I would say so far in part yes,
10:46
Speaker 1: because here we are having this conversation. Here we are
10:49
Speaker 1: having it and already, you know, the trust that that
10:53
Speaker 1: has targeted are already putting forward while they would wouldn't
10:56
Speaker 1: they putting forward various strategies to deal with that strategy,
11:00
Speaker 1: a strategic review from one of them putting dividends up,
11:03
Speaker 1: offering cashis Exitt's talking more about discount management. Their Edinburgh
11:09
Speaker 1: Worldwide Trust has been talking about a big capital return
11:11
Speaker 1: next year, BG Growth actually nothing one of the others,
11:17
Speaker 1: and nothing Herald, nothing but Keystone has put in place
11:21
Speaker 1: or was attempting to put in place a full cash
11:24
Speaker 1: exit for everyone, which now it can't really do because
11:27
Speaker 1: of this business with SABA, who aren't going to vote
11:29
Speaker 1: for it. So they are now putting in place some
11:32
Speaker 1: things and you'll see other trust in the market looking
11:35
Speaker 1: around and going, wow, we might be next. We got
11:37
Speaker 1: to do something and really stepping up by bags or
11:39
Speaker 1: certainly talking about stepping up by bags. So we have
11:42
Speaker 1: a catalyst here. We have a catalyst that is forcing
11:46
Speaker 1: boards to sit down and say, what can we do
11:50
Speaker 1: to deal with these structural structural discounts. And it's very
11:54
Speaker 1: hard to turn around performance in five minutes, right, but
11:56
Speaker 1: you can maybe do something about the discounts and if
11:59
Speaker 1: you can't. If you can't, let's say you buy back
12:02
Speaker 1: and buy back and buy back and buy back, and
12:04
Speaker 1: that it can't remain and your trust becomes very small.
12:07
Speaker 1: Well maybe that's just the way it is, right.
12:09
Speaker 2: Yeah, I mean I think the the most obvious value
12:14
Speaker 2: that SABA has added is to put a rocket up
12:17
Speaker 2: the backside of the sector. You know. I think that
12:22
Speaker 2: I don't think really can be argued with, and to
12:24
Speaker 2: be fair, I don't think anyone really is arguing with it.
12:27
Speaker 2: You know, like these trusts have taken action. The other
12:33
Speaker 2: trusts that are sort of on the hit list, some
12:36
Speaker 2: of them are taking action or at least talking about it.
12:40
Speaker 2: And I think that that in itself is good because
12:44
Speaker 2: also you know, it draws attention to the sector. But
12:46
Speaker 2: the UK capital market as a whole we've been complaining
12:50
Speaker 2: about for quite a while and you know whatever, you know,
12:53
Speaker 2: it's had nearly four years worth now consecutive withdrawals. But
12:58
Speaker 2: the point is that this sort of thing where somebody's
13:01
Speaker 2: noticing the value and it's happening. You know, It's like
13:03
Speaker 2: I mean, Herald has gone from trading on a discount
13:05
Speaker 2: of I think it was you know, it was around
13:06
Speaker 2: about ten percent for most of last year and now
13:09
Speaker 2: he's trading on the premium were like one point five percent.
13:12
Speaker 2: And to be fair, I mean, Herald is probably one
13:15
Speaker 2: of the most well one of the trusts on this
13:19
Speaker 2: list that I would sort of feel it would be
13:21
Speaker 2: a shame if it was taking over. We can discuss
13:24
Speaker 2: that in a moment, but the point is, you know,
13:26
Speaker 2: it was trading a persistent discount and now it's not.
13:29
Speaker 2: So Saba has been good for shareholders in that trust
13:33
Speaker 2: and then all the other trusts because they've all kind
13:35
Speaker 2: of seen their discounts closed. So it's definitely been value
13:38
Speaker 2: to that. And I think the only question from the
13:42
Speaker 2: from the ultimate point of view of our listeners, I
13:44
Speaker 2: guess who you know are the people who hold investments
13:48
Speaker 2: in these trusts, you kind of retail investor, what does
13:52
Speaker 2: what's the next step and what does it mean for them,
13:55
Speaker 2: you know, if SABA wins or if Saba doesn't win.
14:00
Speaker 2: And from that point of view, I think that's where
14:02
Speaker 2: it gets slightly more complicated, just because you know, at
14:05
Speaker 2: the end of the day, if you were fed up
14:06
Speaker 2: weight Herald and you were waiting for the discount to
14:08
Speaker 2: close before you got out well, you know that it's
14:10
Speaker 2: your chance. You know, you should sell today done.
14:13
Speaker 1: You know at absolutely, but.
14:16
Speaker 2: Also you know, I would also like to know, for example,
14:18
Speaker 2: if you were in Keystone, which is you know, I
14:22
Speaker 2: don't think again, I don't think even you know, the
14:25
Speaker 2: chairperson would argue the performance in that has been back.
14:30
Speaker 2: So apart of me also does wonder, like, what what
14:34
Speaker 2: are you thinking if you are currently a Keystone shareholder?
14:37
Speaker 2: Why why is it still on your portfolio at all?
14:40
Speaker 2: You know, It's like I do think there's got to
14:42
Speaker 2: be an element the people taking responsibility here because one
14:45
Speaker 2: of the things that we keep that so everyone keeps
14:47
Speaker 2: talking about is that there are a lot of retail
14:50
Speaker 2: shareholders on these registers, so a lot of retail shareholders
14:55
Speaker 2: own them. And one of the arguments is that SABA
14:57
Speaker 2: has come along and because you need to get fifty
14:59
Speaker 2: percent of however, many votes are cast, so abbas get
15:03
Speaker 2: like thirty percent already or nearly thirty percent in most
15:05
Speaker 2: of these trusts, and so when it goes in and votes,
15:10
Speaker 2: if most of the retail shareholders don't turn hop, then
15:12
Speaker 2: they're automatically going to win. And obviously people keep saying, well,
15:16
Speaker 2: retail shareholders are apathetic, but I'm not sure. I don't
15:19
Speaker 2: I don't actually really understand that you have to be
15:22
Speaker 2: a fairly active investor to have ended up in any
15:24
Speaker 2: of these seven. You have to be someone that chose
15:27
Speaker 2: to buy them. You're not getting put into this by
15:29
Speaker 2: your auto enrollment pension. So if you if you don't
15:34
Speaker 2: go out and vote, or if you don't even you know,
15:36
Speaker 2: if you don't have an opinion and you're not aware
15:38
Speaker 2: of this, then what are you doing with your portfolio?
15:40
Speaker 2: It's like, why is this stuff there and you don't
15:43
Speaker 2: know about it? I mean, it's not that hard to vote.
15:47
Speaker 1: Yeah, but it's interesting John on this business of voting
15:49
Speaker 1: and that several people have said to me in the
15:51
Speaker 1: last couple of days, this is so awful because poor
15:54
Speaker 1: retail investors, it's so hard for them to vote. Well,
15:57
Speaker 1: it kind of isn't interactive investors operating and opt out
16:01
Speaker 1: rather than an opt in system. For years now, Huggers, Landown, Ajball, etcetera.
16:05
Speaker 1: They all have very efficient voting systems. If you want
16:08
Speaker 1: to vote, you can vote now. If people don't vote
16:11
Speaker 1: in this, I think it'd be very interesting and then
16:13
Speaker 1: you and I can do lots of great podcasts on
16:14
Speaker 1: shareholder democracy and what's wrong, howe you able should get
16:18
Speaker 1: on with it, etc. But I have had one from
16:20
Speaker 1: the share Society, an email from them about the problems
16:24
Speaker 1: with the nominee system. I either way that your shares
16:26
Speaker 1: are held on platforms, so you don't hold them directly,
16:29
Speaker 1: the platform holds them for you, and ownership bus is
16:31
Speaker 1: slightly fuzzy, and they believe that there are problems with communications,
16:36
Speaker 1: so it's actually very hard for trust boards to directly
16:40
Speaker 1: contact shareholders. So I would say the main problem there
16:42
Speaker 1: is communication, and if I were to be allowed to
16:46
Speaker 1: reform this system, I would try and make it easier
16:49
Speaker 1: for companies and trust of course our companies to communicate
16:53
Speaker 1: directly with their own shareholders, even if they hold their
16:55
Speaker 1: shares on platforms.
16:56
Speaker 2: You're rate well because a lot of this. I mean,
16:58
Speaker 2: I've never ever seen account pain as aggressive as this
17:01
Speaker 2: to get shareholders vote, which again I think is yet
17:05
Speaker 2: another indicator of you know, some of the potential problems
17:09
Speaker 2: in the sector. It's like you all waits, so now
17:11
Speaker 2: that your job's at risk, you're getting the thing out
17:14
Speaker 2: of it to make sure that you know your your
17:16
Speaker 2: shareholders coming vote. I'm fascinated to see what the ton
17:19
Speaker 2: out is like, because I think that it will be
17:21
Speaker 2: a really strong test of the points that you know
17:25
Speaker 2: in your book about shareholder democracy share you know, I think,
17:30
Speaker 2: and nicely, it's really exciting from that point of view.
17:32
Speaker 2: I mean, you know, very much looking forward to it exactly.
17:36
Speaker 1: I know, I'm slightly embarrassed about being excited about it,
17:38
Speaker 1: because really, you know, I should be horrified and bold, etcetera.
17:40
Speaker 1: I'm kind of excited. Okay, So that's voting out the
17:43
Speaker 1: way why you should do it, et cetera. So now
17:46
Speaker 1: the question is what should you do? How should you vote?
17:51
Speaker 1: What is Saba asually trying to do here? And I
17:53
Speaker 1: did have got him the emails relentless, John. I had
17:59
Speaker 1: one from them in the sector who said that day,
18:01
Speaker 1: you know, what Saba is doing is perfectly valid, but
18:03
Speaker 1: he really wishes that Boras Swinstein would drop the mom
18:07
Speaker 1: and pop stuff and all the talk about how he's
18:09
Speaker 1: the white knight and the defender of the retail investor
18:12
Speaker 1: and all that stuff, when all he's actually doing is
18:15
Speaker 1: a perfectly reasonable arbitrage, that's it, and he's doing it ruthlessly.
18:21
Speaker 1: He's using these discounts of the difference between the navy
18:25
Speaker 1: and the market price, and at the same time to
18:28
Speaker 1: gather assets. And if you look at the asset gathering
18:30
Speaker 1: part of it. We had some communication with Karen Braid,
18:35
Speaker 1: the share of Cheek Keystone, and her core question is
18:39
Speaker 1: if you are the white Knight, if you are the
18:41
Speaker 1: great protector of the retail investor. Keystone has already offered
18:45
Speaker 1: a full cash exit for all shareholders who want it
18:49
Speaker 1: at net hash and value minus one percent one percent,
18:51
Speaker 1: obviously being too to pay all the expenses of doing
18:54
Speaker 1: the whole thing, etc. Now, as that is already on
18:58
Speaker 1: the table, if Saber wants everyone to get out at
19:01
Speaker 1: full value, why are they stopping this happening? Why stop
19:05
Speaker 1: Keystone investors reclaiming their funds first? And then if you
19:09
Speaker 1: then people who don't you want to go to your
19:11
Speaker 1: own offering, then they're left over for you. If you're
19:14
Speaker 1: not doing that, it'd rather suggest that the whole thing
19:17
Speaker 1: that you're trying to do with Keystone at least is
19:19
Speaker 1: simply to gather assets in order to reap the fees
19:22
Speaker 1: from that later.
19:23
Speaker 2: I have struggle to see what what is the I
19:25
Speaker 2: don't know where the comebacks to that.
19:27
Speaker 1: I don't know, but all about it. You just want
19:28
Speaker 1: to interrupt because I'm slightly concerned that Boas is listening
19:31
Speaker 1: to this. Boas, I would like you to send your
19:34
Speaker 1: hate mail to John.
19:37
Speaker 2: You're doing Twitter.
19:38
Speaker 1: It's but on Twitter is going to come to me.
19:43
Speaker 2: Oh yeah, that's the point. Okay, Yeah, said, but I
19:49
Speaker 2: think that's that's not a non field point. Okay, But
19:52
Speaker 2: the moment pops off is part of the rulessness. You know,
19:55
Speaker 2: it's gonna it's a negative sales page either. If if
19:58
Speaker 2: you argue that the relying and shareholder apathy, then on
20:03
Speaker 2: the flip side of that is, well why are they
20:05
Speaker 2: coming on like this podcast? I would keep quiet. You know.
20:09
Speaker 2: If I was relying on shareholder apathy, then I'm not
20:11
Speaker 2: sure I would publicize this as much. So maybe you know,
20:16
Speaker 2: there's an element of hearts and minds alongside of course,
20:19
Speaker 2: you know, I mean if they phtograted the seven, then
20:21
Speaker 2: they want to win them all and yeah, and obviously
20:25
Speaker 2: they make money off the fees, so you want as
20:27
Speaker 2: many assets as possible.
20:29
Speaker 1: For one a lot it would be four billion quid. Yeah,
20:31
Speaker 1: that's why could be quite a trust or trust wouldn't it.
20:34
Speaker 2: I mean, that is the other thing. It's like what
20:36
Speaker 2: their planet they do with it, I guess is where
20:40
Speaker 2: a it's where some of the quite a bit of
20:42
Speaker 2: the criticism comes from. But also it's where I guess
20:44
Speaker 2: that my own view and you understand boards a lot better.
20:49
Speaker 2: But the some of the mechanical aspects of this, like
20:54
Speaker 2: how do you like with these portfolios without driving down
20:59
Speaker 2: the share price, for example, and things like they can
21:05
Speaker 2: you know, the governments, you know, you can have to
21:08
Speaker 2: overhaul these these entire kind of structures. And is that
21:13
Speaker 2: not going to distract to the point that possibly it's
21:15
Speaker 2: going to be detrimental to performance. I mean, I don't know,
21:19
Speaker 2: but I think that the changeover process is bound to
21:22
Speaker 2: be disruptive and complicated in ways that are not clear
21:27
Speaker 2: right now.
21:28
Speaker 1: Well, that's a good point, and changes are always disruptive,
21:32
Speaker 1: but a lot a lot of the of the stocks
21:34
Speaker 1: held in a lot of these portfolios are perfectly standard
21:36
Speaker 1: liquid stuff. And he has said that there will be
21:38
Speaker 1: if were he to get herald, there would be a
21:41
Speaker 1: year for the liquidation, et cetera. The big one in
21:44
Speaker 1: Bailey Gifford, the private company of Culture SpaceX and as
21:47
Speaker 1: he himself says, I don't. I'm pretty sure there's a
21:49
Speaker 1: market for that.
21:50
Speaker 2: Yeah, and that is fair enough, and I can see
21:52
Speaker 2: why they keep that anyway.
21:55
Speaker 1: Yeah, yeah. It more of the question is, I mean,
21:57
Speaker 1: there are governance questions there are Does does Saber Capital
22:02
Speaker 1: really understand exactly how intense the compliance and regularly burdens
22:09
Speaker 1: on trust boards in the UK? Are you know, it's
22:12
Speaker 1: not normal and not acceptable to simply have two non
22:17
Speaker 1: non independent directors on a board. It doesn't it doesn't
22:20
Speaker 1: work like that. And he has said that over time
22:22
Speaker 1: he would get more directors onto his new boards, etc.
22:25
Speaker 1: But starting out like that too, non independence, it's it's
22:28
Speaker 1: not ideal that that's not how that's not how we work.
22:31
Speaker 1: So there are there are governance issues around that, although
22:34
Speaker 1: he says they'd be short term, one would hope they
22:36
Speaker 1: would be short term. And then there is the matter
22:39
Speaker 1: of the new strategy. And again, you know, I'm I
22:43
Speaker 1: think I'm slightly less bothered by this than than some
22:48
Speaker 1: other people in the market, because it seems to me
22:51
Speaker 1: that Weinstein is suggesting that in almost all cases there
22:56
Speaker 1: would be an opportunity for people to get out at
22:59
Speaker 1: a few percentage points at least below nav So it's
23:03
Speaker 1: not necessarily compulsory to roll over into his new strategy,
23:07
Speaker 1: which slightly suggested all the arguments about his performance record
23:12
Speaker 1: and his fees and all that kind of thing. If
23:14
Speaker 1: p you can get out without having to go into
23:17
Speaker 1: that strategy, how effective that strategy is and how much
23:21
Speaker 1: it costs is slightly moved.
23:23
Speaker 2: Yeah, I think that's that's true. I think that's all
23:26
Speaker 2: fair enough, and I guess yeah, I mean, from the
23:28
Speaker 2: point of view voting, I suppose my issue again sort
23:32
Speaker 2: of comes back to what you're thinking as a shareholder
23:36
Speaker 2: of these trusts. So it's like, if you own HAIRLD
23:39
Speaker 2: because you want to take advantage of a small cup
23:44
Speaker 2: global tech stocs, and that's actually a strategy that you
23:49
Speaker 2: believe in, then I struggle to see why you would
23:54
Speaker 2: be keen to swap that out for a strategy of
23:58
Speaker 2: closing investment trust there's going in the UK yep. But
24:03
Speaker 2: again with some of the other trusts, you're kind of like, well,
24:07
Speaker 2: you know, they've get less sort of. I guess specifically,
24:12
Speaker 2: Herald and c CQS seem like quite unique trusts in
24:18
Speaker 2: terms of what they're aiming for. Some of the other stuff,
24:21
Speaker 2: and also the kind of ones that are already getting
24:23
Speaker 2: rolled over I can. My main question to shareholder on
24:26
Speaker 2: them is like, well you should revisit this and think about, well,
24:29
Speaker 2: why why do I own this again? And then think
24:32
Speaker 2: about what you want to vote for in light of
24:35
Speaker 2: that question, because, like I said, I mean certainly something
24:38
Speaker 2: like Keystone, which is which? Which is going to be sold? Anyway?
24:42
Speaker 2: I think maybe have a wee look if you've got
24:44
Speaker 2: that in your portfolio, look at other things that you've
24:46
Speaker 2: got in your portfolio that maybe you haven't thought about
24:48
Speaker 2: for a while, and think about, well, why is this
24:50
Speaker 2: stuff here in the first place?
24:52
Speaker 1: John, I think you've been quite polite there, aren't you.
24:54
Speaker 1: We are actually saying something incredibly rude, but in quite
24:57
Speaker 1: a polite way.
24:58
Speaker 2: That's the best way to have been told. I could
25:02
Speaker 2: called up to HL the last team. I did it
25:03
Speaker 2: in non polite way, so I thought, not.
25:09
Speaker 1: Okay. So one thing that I don't think John and
25:12
Speaker 1: I are going.
25:12
Speaker 3: To do here is to slog through the very catchy
25:17
Speaker 3: discussion about everybody's performance and what is sub's actual performance
25:22
Speaker 3: over three years, five years, ten years, What are the
25:24
Speaker 3: actual fees?
25:24
Speaker 1: What is this? What is that because I think that
25:26
Speaker 1: we might work on the basis that that Windstan Taba
25:30
Speaker 1: will be reasonably good to their word and give everyone
25:32
Speaker 1: an exit. So I suppose John's question is the right one.
25:36
Speaker 1: Would you like to have some cash back at maybe
25:39
Speaker 1: only a couple of percentage points below nav And by
25:42
Speaker 1: the way, in most of these cases, you can have
25:43
Speaker 1: that right now. You're going to have it right now.
25:46
Speaker 1: So if if all you wanted to get out with
25:49
Speaker 1: your cash relatively intact, I mean obviously not if you've
25:51
Speaker 1: lost thirty forty fifty with one of the funds, maybe
25:54
Speaker 1: if you went in the top. But either way you
25:56
Speaker 1: want to get out close to navy, just do it now,
26:00
Speaker 1: and then you know what, if you want to go
26:01
Speaker 1: back into the saber strategy later, assuming he wins one
26:05
Speaker 1: of these, he'll have a lifted vehicle and you can
26:07
Speaker 1: buy back in when all the chaos is complete. So
26:11
Speaker 1: that seems like a great way to do it. If
26:13
Speaker 1: you actually want to be in this saber strategy, take
26:17
Speaker 1: your money, wait, buy back in later. If you don't
26:20
Speaker 1: want to be in the Saber strategy and you do
26:23
Speaker 1: want to stick with, for example, Herald or whatever it was,
26:26
Speaker 1: then you need to get out there and vote, to
26:28
Speaker 1: hang on to the strategy that you like. Is that
26:31
Speaker 1: a fair end interpretation job?
26:33
Speaker 2: Definitely, I think that is the important thing, because that
26:36
Speaker 2: was the other thing that jumped to whenever I was
26:38
Speaker 2: having the discussion with boys. Was I mentioned the you
26:41
Speaker 2: know they can saying a bit who or the cynical
26:44
Speaker 2: views that you think the retail share holders want vote
26:46
Speaker 2: and he basically agreed, not in so many words, by saying, well,
26:51
Speaker 2: you know, the alternate view is that if the retail
26:52
Speaker 2: showholders don't vote is because they're not engaged enough with
26:55
Speaker 2: the current management and they don't think they're doing a
26:57
Speaker 2: good job. So you know, he'd be said yes and no.
27:01
Speaker 2: For if you don't show up, it's a vote for
27:03
Speaker 2: cyber so for the other.
27:07
Speaker 1: Well, it's true, I mean same with politics, right, not
27:10
Speaker 1: voting is the equivalent to voting in the end?
27:16
Speaker 3: Very cheap?
27:17
Speaker 1: Boy, do you get insights on this show? Is there
27:24
Speaker 1: is there anything else we need to discuss? I suppose
27:27
Speaker 1: one thing I would say is there's been a lot
27:28
Speaker 1: of conversation about the importance of the investment trust industry
27:32
Speaker 1: as a whole to the UK financial sector. It's important
27:37
Speaker 1: that there it's got all the infrastructure around it, and
27:40
Speaker 1: in particular, the companies such as Herald that invests in
27:43
Speaker 1: small companies and growing companiesn't a part of a startup
27:46
Speaker 1: infrastructure and how important that is, and I agree that
27:50
Speaker 1: it's very important, absolutely it is. However, however, the key
27:55
Speaker 1: purpose of a fund trust is to make money for
27:59
Speaker 1: its investors. You can't just be part of the ecosystem.
28:02
Speaker 1: The ecosystem alone is not enough. You have to make
28:04
Speaker 1: the money. You have to fulfill the requirements of the
28:07
Speaker 1: people who've given you their money. So it's not enough
28:09
Speaker 1: just to talk about how we have to protect this
28:12
Speaker 1: sector because it's so important to the UK ecosystem.
28:16
Speaker 2: That's not enough, No, it's not. And the other point
28:19
Speaker 2: is that is the thing that sharpens these things is
28:23
Speaker 2: competition and events like this. You know, the fact that
28:26
Speaker 2: you know, boys Weinstein's able to do this demonstrates that
28:31
Speaker 2: something has been going wrong and hasn't been addressed quickly enough.
28:35
Speaker 2: And I guess that's the point of free market and
28:37
Speaker 2: I guess my people just not used to free markets
28:39
Speaker 2: functioning in this way. Oh well, depth, what any of
28:47
Speaker 2: you pay for it?
28:49
Speaker 1: Thank you? John? Right, So there we go. The key
28:52
Speaker 1: answer here is that everybody is right and everybody is
28:56
Speaker 1: also wrong. That is my final in site for the day.
29:01
Speaker 1: Make your decision, but whatever you decide, get up there
29:05
Speaker 1: and float. This is important for showlder democracy. It's important
29:09
Speaker 1: to the trust if you want to stay involved with
29:12
Speaker 1: that trust, and it's really important to the fund managers
29:14
Speaker 1: you run those trusts. I mean, they don't want to
29:16
Speaker 1: lose this money. Do they think about them? Think of
29:18
Speaker 1: the fund managers. Thanks for listening to this week's Mary
29:24
Speaker 1: and Drugs Money Debris. If you like our show, rate
29:26
Speaker 1: to review and subscribe wherever you listen to podcasts. Also
29:28
Speaker 1: be sure to follow me and John on Excel, Twitter
29:31
Speaker 1: at marinas w and John Underscore Staffac. This episode was
29:34
Speaker 1: produced by Summer Siety and Moses, and sound designed by
29:37
Speaker 1: Blake Maples and Our executive producer is Brendan Francis Needham.
29:41
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29:43
Speaker 1: always welcome. Our show email is Merrow Money at Bloomberg
29:47
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29:50
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30:01
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