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How Saba's Boaz Weinstein Plans to Transform UK Investment Trusts · Merryn Talks Money

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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to Maren Talks
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Speaker 1: Money the podcast and people who know the markets Explain
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Speaker 1: the markets. I'm Meren some set web. This week we
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Speaker 1: are doing things slightly differently. First of all, it is
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Speaker 1: not me who interviewed our main guests for the week,
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Speaker 1: but in fact it was John. I'll explain to you
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Speaker 1: why in a minute. Also, we're dropping the episode slightly
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Speaker 1: early because it's got rather more immediate news value than usual. Right,
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Speaker 1: So this podcast is all about investment trusts, which are
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Speaker 1: effectively companies, the business of which is to invest in
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Speaker 1: other companies. They're an awful lot of them listed in
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Speaker 1: the UK. They give investors, who are of course also
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Speaker 1: shareholders in the companies, access to everything from private equity
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Speaker 1: to UK equity income, to smaller companies, emerging markets, Japanese equities,
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Speaker 1: just to name few things available. They have a few
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Speaker 1: advantages over regular investment funds. They can borrow to invest
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Speaker 1: for example, and crucially, just like other listed companies, they
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Speaker 1: have boards of directors whose job it is to represent
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Speaker 1: the interests of shareholders or investors. So here's the thing.
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Speaker 1: In the last few years, the sector has not been
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Speaker 1: doing so well, the shares have on average been trading
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Speaker 1: at historically high discounts to their net asset value, something
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Speaker 1: that suggests a lack of demand for the shares, and
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Speaker 1: the underlying performance in a couple of cases hasn't been
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Speaker 1: great either. So enter US activist investor SABA Capital. About
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Speaker 1: a year ago, Boas Einstein, the founder of SABA, noticed
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Speaker 1: the large discounts in the sector, sometimes up to around
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Speaker 1: twenty percent, meaning that you could effectively buy the assets
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Speaker 1: in the portfolio at a twenty percent discount of their
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Speaker 1: market value. Saba started buying the shares in seven of
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Speaker 1: The trustee now has stakes ranging from nineteen to twenty
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Speaker 1: nine percent, enough for him to call for general meetings
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Speaker 1: at all seven to replace the current board and replace
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Speaker 1: them with his own people. Well, you will know these trusts,
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Speaker 1: or at least you'll have heard of some of them.
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Speaker 1: There's Herald Investment Trust, Edinburgh, Worldwide, Bailey give a US Growth,
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Speaker 1: so big names in the sector. In this podcast, John
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Speaker 1: Stirbeck talks to bos wy Inside about why he's doing this,
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Speaker 1: why he's interested in UK investment trusts, and what investors
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Speaker 1: can expect if he succeeds. Two more things First, regular
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Speaker 1: listeners will know that I sit on the board of
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Speaker 1: a couple of investment trusts. Neither I hears him to
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Speaker 1: add or among the seven, but nonetheless, as I have
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Speaker 1: skin in the sector game, John and I figured it
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Speaker 1: was best if he did the interview. Second, this is
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Speaker 1: a test of shareholder democracy. The platforms have all made
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Speaker 1: major efforts to make it easy for you to vote
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Speaker 1: on the shares that you own. Now's your chance to
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Speaker 1: do so. Have your say either way. Over to John.
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Speaker 2: Great to have you in the Shaw Boys look forward
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Speaker 2: to hearing all about this because obviously it's caused a
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Speaker 2: big start or what he had in there the UK.
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Speaker 2: But before we get into your campaign, do you want
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Speaker 2: to tell us a bit about yourself and about your
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Speaker 2: background and a boit Saba and it came about.
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Speaker 3: Sure, so thanks for having me. I worked on Wall
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Speaker 3: Street ever since I was fifteen years old. I was
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Speaker 3: very lucky to get a summer job, and thirty six
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Speaker 3: years later, the excitement of the ever changing nature of
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Speaker 3: markets and mispricings and arbitrage really stays fresh with me.
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Speaker 3: And I first started out working at a couple of
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Speaker 3: banks and then in nine I started SABA. I had
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Speaker 3: spent the weekend of Lehman Brothers failure at the New
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Speaker 3: York fed which was one of the most dramatic nights
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Speaker 3: of my life. And I got to see a lot
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Speaker 3: of crazy things over the years. I was trading when
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Speaker 3: the towers were hit by the nine to eleven attacks
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Speaker 3: and actually spoke on the phone with someone in the
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Speaker 3: towers the lines were working, who was asking for help
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Speaker 3: and advice. And just to have been there at the
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Speaker 3: moments in history, whether it's financial history or global history,
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Speaker 3: but to be a trading risk has been an incredible experience.
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Speaker 2: Just one thing. Though, you said you started Wall Street
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Speaker 2: when you were fifteen. That's quite precocious. How did that
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Speaker 2: come about?
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Speaker 4: There's a lot of luck in everything.
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Speaker 3: And I happened to have been walking by the job
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Speaker 3: postings in my high school and there was a woman
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Speaker 3: who had gone to a similar school who needed somebody
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Speaker 3: at a deep voice.
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Speaker 4: As I talked to you today, my voice.
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Speaker 3: Was actually quite unusually raspy, but I had a similar
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Speaker 3: voice when I was fifteen. And she was a very
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Speaker 3: successful financial consultant named Jeanine Crane. Her mother actually was
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Speaker 3: one of the top ten brokers and Merrill Lynch and
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Speaker 3: this team needed someone to make appointments for them, and
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Speaker 3: I got to sit there and listen to research channelists
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Speaker 3: talk about stocks, and I just had the most incredible
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Speaker 3: experience and things build on each other, and I was
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Speaker 3: able to parlay it into a interview at Goldman Stacks
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Speaker 3: and I was able to get a summer job on
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Speaker 3: the trading floor when I was nineteen.
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Speaker 2: Well, fantastic experience. So you found it SABA in two
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Speaker 2: thousand and nine. Tell us a bit more about that
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Speaker 2: and how you eventually came to focus on c closed
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Speaker 2: end finds in the US. Closed end finds are basically
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Speaker 2: what we call investment trusts in the UK.
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Speaker 3: Yeah, let's call it investment trust Today. I can deal
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Speaker 3: with the cross continental differences, so we can even say
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Speaker 3: tomatow if you make me so right now, I think
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Speaker 3: I'm having some thrown at me by some of my adversaries.
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Speaker 2: Possibly.
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Speaker 4: Yeah.
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Speaker 3: I started SAVA in a very difficult time for markets.
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Speaker 3: I started amidst the ashes of Lehman Brothers, the global
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Speaker 3: financial crisis. Bernie madeoff and I started very modestly. We
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Speaker 3: raised one hundred and sixty million by the time we
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Speaker 3: launched August nine, and then because of I would say determination,
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Speaker 3: force of will, and being able to convey a story
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Speaker 3: about the opportunity in relative value trading. We're not a
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Speaker 3: long biased investor. For the most part, I was able
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Speaker 3: to take the firm from its humble beginnings. We got
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Speaker 3: up to about five and a half billion by March
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Speaker 3: twenty twelve, which was really quite a feat. But our strategy, jeez,
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Speaker 3: have really evolved from more narrowly focused on the credit
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Speaker 3: markets and credit against equity and having now moved for
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Speaker 3: the past more than a decade into different kinds of
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Speaker 3: arbitrage that we hadn't done before, namely investment trusts.
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Speaker 2: Okay, so targetting closed end funds and presumably that's to
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Speaker 2: try and narrow the discount. Is that your primary goal?
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Speaker 4: Yeah?
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Speaker 3: So while there are managers that have alpha, these funds
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Speaker 3: in the main have destroyed value bit by bit through
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Speaker 3: either high fees, which some funds have but not necessarily
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Speaker 3: the ones that we're talking about today, or poor performance
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Speaker 3: because of whether it's a b team that's running it
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Speaker 3: for a big institution rather than the top people, or
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Speaker 3: just bad luck, bad decisions, or really investors feeling like
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Speaker 3: they want out of this product. And they want to
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Speaker 3: go into more popular products like ETFs. Funds can trade
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Speaker 3: a big discounts, and that is what attracted me. It
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Speaker 3: wasn't the chance to invest a lot inside a manager.
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Speaker 3: It was the chance to buy a pound for eighty
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Speaker 3: five p and turn it back into a.
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Speaker 2: Pound over here. For investment trusts, there's a lot of retail.
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Speaker 4: There's a lot of.
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Speaker 2: Private investors, small shareholders in the US. Is it like
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Speaker 2: that or does it work institutional holders for your particular funds.
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Speaker 3: So the closed end funds in the US or the
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Speaker 3: investment trusts in the UK that we buy are held
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Speaker 3: very much by retail investors. There can be institutions in them,
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Speaker 3: and in fact there are in various funds that were
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Speaker 3: invested here in the UK or in the US, but
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Speaker 3: saba's investors. So the investors that come into our funds. First,
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Speaker 3: we manage two closed end funds in the US, and
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Speaker 3: we manage an ETF of closed end funds. Those are
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Speaker 3: primarily retail investors, but our hedge funds are primarily institutional investors.
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Speaker 3: They might be a pension fund in the US that
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Speaker 3: is considered a sophisticated institution, but it represents tens of
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Speaker 3: millions of retirees. So ultimately we are getting back to
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Speaker 3: mom and pop no matter how you look at it.
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Speaker 3: And I think it's worth adding that actually our second
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Speaker 3: most popular country to invest in sabas after the US,
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Speaker 3: is the UK. We have significant institutional investors upwards of
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Speaker 3: single tickets of three or four hundred million dollars from
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Speaker 3: some UK institutions.
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Speaker 2: Okay, again to your actual campaign and the focus on
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Speaker 2: the UK. Why are the UK specifically and why now?
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Speaker 2: Is that something that particularly caught your eye.
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Speaker 3: Yes, So we started investing in closed in funds for
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Speaker 3: the firm in twenty and thirteen, so we're up on
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Speaker 3: eleven years now, and I'd invested in them personally very
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Speaker 3: long time ago, so knew quite a bit about them.
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Speaker 3: But so the UK was something where they've been a
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Speaker 3: trade or two to do from the very beginning, but
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Speaker 3: not not really something more than that until three years ago.
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Speaker 4: So I want to break that down for you.
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Speaker 3: We had spent the first in years squarely focused in
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Speaker 3: the US. We've been had as much some time investment
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Speaker 3: in Australia than we as we had in the UK.
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Speaker 3: Why Because, to the UK's credit, the governance of the funds,
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Speaker 3: the rules of how they treat their shareholders was quite
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Speaker 3: a bit better than the US. There are things that
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Speaker 3: are done in the US to the investors by the
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Speaker 3: manager that it would just shock you. So the better
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Speaker 3: governance was appealing to us. But there wasn't much of
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Speaker 3: a discount because of that governance. Because the industry, which
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Speaker 3: is one hundred and fifty years old in the UK,
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Speaker 3: had done a better job of treating its investors. That
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Speaker 3: led to funds trading better. The industry grew and the
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Speaker 3: UK was about as big as the US, even bigger
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Speaker 3: until three years ago. So I want to put a
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Speaker 3: pin in that and then tell you what happened over
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Speaker 3: the past three years, which is why we jumped in.
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Speaker 2: That's interesting. So you really actuallycing this back to twenty
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Speaker 2: twenty one roundnet and the else because obviously we've been
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Speaker 2: agonizing a lot in the UK about the UK stock
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Speaker 2: market generally and the idea that is praiced a discount
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Speaker 2: to markets more broadly, and obviously particularly the US, because
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Speaker 2: the US has beaten everything. But what why is it
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Speaker 2: you feel happened in twenty twenty one that particularly made
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Speaker 2: everything worse.
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Speaker 3: Yeah, So first, just so everyone understands a lot of
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Speaker 3: these funds. In fact, the ones that we own not
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Speaker 3: just UK stocks. In fact, they might own majority US
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Speaker 3: they might own Nvidia and Tesla, let's say, and so
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Speaker 3: their collection. What are these investment trusts? For anyone listening
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Speaker 3: it doesn't really know much about it. They are a
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Speaker 3: collection of assets managed by a manager, a venerable manager
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Speaker 3: that was able to raise the money.
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Speaker 4: And it's just a pool.
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Speaker 3: And ettfs are much more common in the US these
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Speaker 3: days because you can get out on of these notice
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Speaker 3: at fair price at NAV and the fees are often half.
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Speaker 3: But these investment trusts which own again a collection of stocks.
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Speaker 3: In twenty twenty one, around the time that inflation was
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Speaker 3: considered to be starting to be a problem and we
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Speaker 3: had the LDI crisis in the UK, it created sellers
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Speaker 3: of assets and there weren't really too many natural buyers.
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Speaker 3: So what happened was the market went from very little
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Speaker 3: or no discount to big discount. And we didn't know
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Speaker 3: if that was a temporary feature because it wasn't generally
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Speaker 3: true in the UK, and so we started to buy
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Speaker 3: at eleven percent discount, thirteen percent discount, eighteen percent discount.
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Speaker 3: Even some funds that at private holdings you could buy
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Speaker 3: a twenty five percent discount, even forty percent discount if
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Speaker 3: people really thought it was troubled. So you can get
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Speaker 3: enormous discounts. And I want to just add one more point.
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Speaker 3: This is not discount to someone's fair value about where
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Speaker 3: UK stocks ought to be or ustoks. This is discount
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Speaker 3: to the closing price. This is an actual discount, not
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Speaker 3: a hypothetical discount. And so that's when we jumped in.
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Speaker 3: And we had believed in the beginning that it was
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Speaker 3: going to be transitory, that the discounts would go away,
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Speaker 3: but instead it got worse. And I can take you
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Speaker 3: through that three year timeline very briefly if you want.
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Speaker 2: Yeah, absolutely well, first of all, just spail fort of them.
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Speaker 2: So there are seven investment trust that you've targeted just now,
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Speaker 2: and you've proposed and requisition general extraordinary general meetings at
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Speaker 2: the seven of these with the aim of replacing the
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Speaker 2: boards basically. And the funds are Bailey Gifford, US Growth, Keystone,
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Speaker 2: Post of Change Investment Trust. All of those are Bailey Giffard.
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Speaker 2: There's Jenis Henderson, which runs Henderson Opportunities Trust in the
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Speaker 2: European Smaller Companies Trust and then the other two are
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Speaker 2: CQS Natural Resources Growth and Income and Herald Investment Trust. Now,
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Speaker 2: I suppose the thing that jumps out to me certainly
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Speaker 2: is these trusts all our growthy trusts. Is there a
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Speaker 2: particular reason why you've gone for that kind of area.
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Speaker 2: Did the discount prey much greater because of their rise
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Speaker 2: and interest rates for example, like some pople are pointed
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Speaker 2: out that the last three years have been particularly bad
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Speaker 2: for these kinds of trusts, or is there another reason
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Speaker 2: behind that.
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Speaker 3: No, we wake up every morning and we look at
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Speaker 3: the five hundred different options for us that half of
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Speaker 3: them are in the UK, almost half in the US,
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Speaker 3: and then you have a little bit of Canada in Australia.
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Speaker 3: We look at where are the biggest discounts, And so
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Speaker 3: it's less what saba's view on the small cap equities
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Speaker 3: and more where are the pressure points? Where are investors
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Speaker 3: so frustrated that they'll sell these things at the biggest discounts.
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Speaker 4: And I think it's all.
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Speaker 3: Too convenient to say, oh, this hasn't been a period
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Speaker 3: with rising interest rates that's been good for stocks, because
13:24
Speaker 3: look today at how well the markets have done. You
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Speaker 3: started with the Bailey Gifford Fund maybe a UK institution,
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Speaker 3: but the fund is called the ticker is USA. It
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Speaker 3: owns US stocks. We know that when you hold Nvidia
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Speaker 3: and Tesla and Microsoft, you're winning. But the shocking thing
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Speaker 3: is that when I take these past three years and
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Speaker 3: we strip out the discount, we just look at how
13:45
Speaker 3: did the stocks do in their portfolio. You have benchmarks
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Speaker 3: that they themselves selected which are up a lot despite
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Speaker 3: the points you made about higher rates. Look in the
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Speaker 3: US at the s and p up near six thousand.
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Speaker 3: Where was it three years earlier? And so investors went
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Speaker 3: into the funds had all the expectation in the world
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Speaker 3: that if markets went up, if stock markets went up,
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Speaker 3: they would go up. If markets went down, they would
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Speaker 3: go down. But we've seen a big bull market and
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Speaker 3: here's the shaker. These seven funds the past three years
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Speaker 3: have lost collectively, I'm not nitpicking on the worst one,
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Speaker 3: have lost fourteen percent for their investors. And that's why
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Speaker 3: investors are so frustrated. That's why these things went to
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Speaker 3: big discount and state of big discount. It was because
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Speaker 3: of on the average terrible performance. Let's call a spade
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Speaker 3: a spade. If the portfolio loses fourteen percent and the
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Speaker 3: market makes forty percent.
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Speaker 4: You have a problem with your investors.
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Speaker 2: You've kissed clayed them as the measurable seven, which is
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Speaker 2: obviously quite a catchee. Can a phrase the reference in
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Speaker 2: the magnificent seven? Obviously each individual trust has got different
14:50
Speaker 2: admirable performance in different fact there's been for examples, to
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Speaker 2: take one that has been highlighted specifically, and I think
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Speaker 2: you've actually acknowledged this herald investment trust as a kind
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Speaker 2: of long and in sort of investor in smaller tech companies.
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Speaker 2: And while yeah, it's maybe struggled over the past three years,
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Speaker 2: it's it's got a very good long term track record
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Speaker 2: and obviously quite a lot of loyalty because it's had
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Speaker 2: to say manager for a very long period of time,
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Speaker 2: and she's very highly respected. Do you think it's necessarily
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Speaker 2: reasonable to be bracketing all of these kind of trust
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Speaker 2: as miserable on.
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Speaker 4: The average, they're miserable.
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Speaker 3: So you're right, So let's talk about one of the
15:31
Speaker 3: best ones in terms of investors esteem. But I also
15:34
Speaker 3: want to tell you you're magnificent because you're willing to
15:37
Speaker 3: overlook three years of that reforming.
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Speaker 2: I'm a long term investor. I'm a long term investor.
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Speaker 4: Boy, I love it.
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Speaker 3: You should come invest in our funds because because we
15:48
Speaker 3: live in a world where if we have one bad
15:50
Speaker 3: quarter or one bad year, you know, you make money
15:53
Speaker 3: for your clients, you raise money, you lose money, you
15:56
Speaker 3: lose investors, and you're willing to overlook. So I just
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Speaker 3: pulled it up. So yes, So the average lost fourteen
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Speaker 3: percent this fund. If I just take January first, twenty
16:05
Speaker 3: twenty two, okay, it's actually lost a little bit of money.
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Speaker 3: Our US products that just owns these things. We just
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Speaker 3: owned a bunch of closed end funds. It made forty percent.
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Speaker 3: If I pull up the S and P, it's going
16:17
Speaker 3: to have made an ungodly amount of money. And actually,
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Speaker 3: Miss Potts, her largest holding coming into this year twenty
16:23
Speaker 3: twenty four, became a Meme stock of stores. It went
16:26
Speaker 3: up three hundred percent. So somehow there are things in
16:29
Speaker 3: the portfolio that are just doing so poorly that you
16:32
Speaker 3: can have markets up so much, yet yet her portfolio
16:35
Speaker 3: lose a little bit of money. And this is what
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Speaker 3: I would say. Her track record is fantastic since nineteen
16:40
Speaker 3: ninety four. Okay, I acknowledged it. And that's also why
16:44
Speaker 3: we decided to sweeten the offer for investors who may
16:47
Speaker 3: be attached and may be so forgiving that they don't
16:50
Speaker 3: care that the markets went up forty and they and
16:53
Speaker 3: they lost a little bit of money. And so we've
16:55
Speaker 3: offered in that fund that any investor that wants to
16:59
Speaker 3: get undred percent of their money back at ninety nine
17:02
Speaker 3: ninety nine, meaning ninety nine percent of asset value, they
17:06
Speaker 3: may do. So we would offer that to them, which
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Speaker 3: is a style of governance that far exceeds the industry,
17:12
Speaker 3: not just in the US in the UK, which I'll
17:14
Speaker 3: explain in a minute, but let me just add that
17:16
Speaker 3: the closed end funds HRI when we started buying it
17:19
Speaker 3: in twenty twenty two, it was north of a twenty
17:22
Speaker 3: two percent discount. So as much as people love Katie,
17:26
Speaker 3: they didn't love her enough that there were no buyers
17:28
Speaker 3: willing to pay nineteen eighteen seventeen, and we were able
17:31
Speaker 3: to buy big stakes at double digit discounts all the
17:34
Speaker 3: way through until we showed up a month ago with
17:37
Speaker 3: a very big position.
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Speaker 4: And so I pona just say one thing.
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Speaker 3: We have helped thousands and thousands of mom and pop
17:43
Speaker 3: investors that own these things take their portfolio from seventy
17:47
Speaker 3: eight percent of NAV, the price has gone up significantly
17:51
Speaker 3: now to almost NAV thanks to our activism.
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Speaker 2: I mean, do it. I think a lot of investors
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Speaker 2: of quite excited about the fact that there is someone
18:02
Speaker 2: like Sabah and some of the other activists paying attention
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Speaker 2: to the investment trust sector. I guess where I suppose
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Speaker 2: some of the concerns that are whether this is essentially
18:15
Speaker 2: a time when the UK is out of favor, and
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Speaker 2: it's one thing to be comparing the performance to the
18:24
Speaker 2: US market, but either the UK itself, as I said,
18:28
Speaker 2: is very well known that there's a wider kind of
18:31
Speaker 2: market down or on the UK, and this kind of
18:35
Speaker 2: macro environment has just been very bad for most things
18:38
Speaker 2: that are UK listed daft things like oil companies trading
18:42
Speaker 2: a massive discount to their equivalents in the US, even
18:45
Speaker 2: though they all basically own very similar assets and are
18:49
Speaker 2: very similar sort of strategies. And I guess that's the
18:52
Speaker 2: question is like, is good that you're drawing attention to
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Speaker 2: the massive discounts in this area, but is it follow
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Speaker 2: on that you would then be a better manage it
19:04
Speaker 2: all of these assets.
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Speaker 4: That's a fair question.
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Speaker 3: I think if you take a step back, SAVA has
19:10
Speaker 3: bought two billion euros worth of these funds. Okay, And
19:15
Speaker 3: when we look at the holder's list and what's been happening,
19:18
Speaker 3: and I can read articles that were in the Ft
19:20
Speaker 3: or in Bloomberg the last three years that were so
19:23
Speaker 3: negative on this sector. When we look at the holders list,
19:26
Speaker 3: we see all the top investors selling and only one
19:29
Speaker 3: institution buying us. So first, if we didn't buy, this
19:34
Speaker 3: market would be in much worse shape. Secondly, we do
19:37
Speaker 3: not come as American American hedge funds to go and
19:42
Speaker 3: cause trouble in the UK. We are equal opportunity. Okay,
19:46
Speaker 3: we're causing trouble as they see it in the US. Okay,
19:49
Speaker 3: tens of thousands across even a few funds, so hundreds
19:53
Speaker 3: of thousands if you put funds together of investors that
19:56
Speaker 3: have seen the benefits of us making their portfolio go
20:00
Speaker 3: back up to nev and the multiplier effect them the
20:03
Speaker 3: interest on interest, the time value of money has been
20:06
Speaker 3: so significant. So don't we not only have caused so
20:10
Speaker 3: far the portfolio to rise. But let's look a step further.
20:14
Speaker 3: If we're successful here, we would endeavor to bring the
20:18
Speaker 3: first investment trust to the UK that should allow investors
20:23
Speaker 3: to benefit from the opportunities in these discounts rather than
20:28
Speaker 3: suffer from it, rather than be a casualty of it.
20:30
Speaker 3: So we would have an investment trust made up of
20:33
Speaker 3: some of these seven which everyone's were successful in. And
20:36
Speaker 3: if we're given the mandate, where we would use our
20:39
Speaker 3: acumen to go in the market, find value, buy things
20:42
Speaker 3: at eighty six, turn them back into one hundred as
20:45
Speaker 3: we have in the US. You could see our track
20:46
Speaker 3: record in our US vehicles and that's a really exciting
20:49
Speaker 3: opportunity for many UK investors who want to profit from
20:52
Speaker 3: these discounts rather than suffer from it. And lastly, you
20:56
Speaker 3: could look at the portfolios as they are today. You
20:59
Speaker 3: again started with the one that's US based, even though
21:01
Speaker 3: it's Bailey Gifford. Money would be coming out of the
21:04
Speaker 3: US equity market and be put directly into what the
21:07
Speaker 3: market that needs it the most, the UK investment trust market.
21:10
Speaker 3: We would take that capital and buy billions more of
21:13
Speaker 3: UK investment trust. We would push the industry to be
21:16
Speaker 3: governed better and to trade better, and I think we
21:18
Speaker 3: would eventually be seen even by the managers as having
21:21
Speaker 3: done a great service to the industry.
21:23
Speaker 2: So I suggest to be clear, your plane would be
21:26
Speaker 2: whichever ones you get hold of. The main goal is
21:31
Speaker 2: to mostly liquidate those portfolios and then use that money
21:36
Speaker 2: to buy other discounted investment trusts. Is that fair or
21:39
Speaker 2: is it more complicated than that?
21:41
Speaker 3: There's one thing in between that we are willing to
21:44
Speaker 3: do that. For example, Bailey Gifford when they took over
21:47
Speaker 3: Keystone KPC, they did not give this their investors a chance,
21:51
Speaker 3: so they were not the prior manager. I believe it
21:53
Speaker 3: was Aberdeen. They took over the fund, change in manager,
21:57
Speaker 3: change in strategy, and they did not offer those original
22:01
Speaker 3: investors a chance to get out. They were then trapped
22:03
Speaker 3: with this new manager, albeit a venerable manager. But the
22:07
Speaker 3: performance of Keystone has been disastrous. If anyone wants to
22:11
Speaker 3: look up what the definition of a disaster is the
22:14
Speaker 3: Keystone Positive Change Fund. I think over five since they
22:17
Speaker 3: took it over underperform their benchmark by one hundred percent
22:21
Speaker 3: or something impossible, or maybe it underperformed by seventy and
22:24
Speaker 3: underperform us by one hundred so anyhow, so they were
22:27
Speaker 3: not afforded the chance to exit. What TSAVO would do
22:30
Speaker 3: upon the change in the board is offer investors significant
22:34
Speaker 3: liquidity in the case of the sixth funds out of
22:37
Speaker 3: the seventh significant and in the seventh complete. So anyone
22:41
Speaker 3: who wants to get out can finally, after years of struggling,
22:44
Speaker 3: get out near nav at ninety nine percent. And whoever
22:47
Speaker 3: wants to stay in and be a part of the
22:49
Speaker 3: future will stay in and be a part of our
22:52
Speaker 3: product offering, which will go into the investment trust market
22:55
Speaker 3: each day and find opportunity.
22:58
Speaker 2: Just don't own a practical point of view there. The
23:00
Speaker 2: most famous UNLESSTED asset that some of these trusts owned
23:04
Speaker 2: is SpaceX elon Musk satellite operator. What would you do
23:08
Speaker 2: about reason liquidity and order? How would you deal with
23:12
Speaker 2: unlessted elements to the portfolios?
23:14
Speaker 3: The portfolios again, I think it's worth talking about the
23:16
Speaker 3: interesting bits. But the portfolios are something like ninety eight
23:21
Speaker 3: percent public. Okay, there's this two percent private bucket, and
23:25
Speaker 3: the biggest holding in the private bucket is actually captured
23:28
Speaker 3: everyone's imagination is SpaceX. Now there's a difference between being
23:33
Speaker 3: private and a liquid and private, and everybody wants to
23:36
Speaker 3: buy it.
23:36
Speaker 4: First it would not.
23:37
Speaker 3: Be hard to sell it, but second we are considering
23:41
Speaker 3: for the ones that have SpaceX, a different exit, a
23:44
Speaker 3: different solution, one that will be seen in hindsight as
23:48
Speaker 3: having been We've considered different for different funds, different outcomes,
23:52
Speaker 3: And with SpaceX, I think you're absolutely right, it deserves
23:55
Speaker 3: consideration for perhaps allowing investors to stay in it if
23:58
Speaker 3: we can find a way to do that. And I
24:00
Speaker 3: can envision a number of different scenarios for that, and
24:03
Speaker 3: I think SpaceX deserves to stay in the portfolio for
24:07
Speaker 3: the most part, not promising the way things will be
24:10
Speaker 3: in six months, but I think you bring up a
24:12
Speaker 3: great point.
24:13
Speaker 2: The other bit of pushback that I've seen from various
24:17
Speaker 2: commentators is this idea that so a lot of these
24:21
Speaker 2: trusts do have a lot of detail shareholders, and one
24:25
Speaker 2: thing that retail shareholders, mostly because the mechanisms haven't been
24:29
Speaker 2: there historically although they are now, is that they're apathetic
24:33
Speaker 2: when it comes to voting. And one of the points
24:36
Speaker 2: that lots of people have made are the sabbats coming in,
24:40
Speaker 2: We've asked for these extraordinary general meetings, and then the
24:43
Speaker 2: risk is that essentially you the vote goes your way
24:47
Speaker 2: because no one turns up on the day. Is that
24:51
Speaker 2: something that has factored in to your thinking, or is
24:55
Speaker 2: this Do you feel this is unfair?
24:57
Speaker 4: What are you?
24:58
Speaker 2: How would you feel if a few when because oddly
25:01
Speaker 2: any detail investors I actually turn up to cast the vote.
25:04
Speaker 3: Yeah, I think personally, if these funds had made their
25:07
Speaker 3: investors a lot of money in this bull market instead
25:09
Speaker 3: of making a negative return, I think many more retail
25:12
Speaker 3: investors would turn up in support. Because there's a vote
25:16
Speaker 3: in favor. There's a vote against, but no vote is
25:19
Speaker 3: also a vote in a sense against the manager because
25:21
Speaker 3: they are definitely getting the phone calls right. The manager
25:24
Speaker 3: has the list of names. I have a big disadvantage.
25:26
Speaker 3: I don't have that listen names. That's why I'm here
25:29
Speaker 3: with you the esteemed journalist, to get the word out.
25:31
Speaker 3: And we will have done this special webinar on the fourteenth.
25:36
Speaker 3: People who want to go and see that can go
25:37
Speaker 3: back and look on the website. So we're trying to
25:39
Speaker 3: get the word out. They have the full list to
25:41
Speaker 3: get that word out. So if they're decrying, no fear,
25:45
Speaker 3: our investors don't vote. I didn't set up your electoral system.
25:49
Speaker 3: It's actually a really interesting point because we had one
25:52
Speaker 3: manager say to me directly. I spoke to them. They
25:55
Speaker 3: said it's no fair. They said exactly what you said,
25:58
Speaker 3: and they said, there are no institutional investors our fund.
26:01
Speaker 3: I mean, you know what I said to them, Why
26:02
Speaker 3: don't you go back one year or two years ago,
26:05
Speaker 3: there were tons of institutional investors in your fund. You're
26:07
Speaker 3: claiming everyone loves you, but they were desperate to get
26:10
Speaker 3: out and to sell you into the marketplace at a
26:13
Speaker 3: fifteen or twenty point discount. And so we've assembled a
26:16
Speaker 3: portfolio of tortured souls, people that couldn't stay in, and
26:20
Speaker 3: we have taken that discount, and now it's at a
26:22
Speaker 3: very small discount, and the retail investor who did stay
26:25
Speaker 3: in has benefited. It's the institutional that wanted out, and
26:29
Speaker 3: here we are that institution is no longer there to
26:31
Speaker 3: vote for them. I would submit to you that they
26:33
Speaker 3: voted with their feet and they exited to us.
26:36
Speaker 2: So I think you've made that one very clear. Say
26:38
Speaker 2: this small investor does tun up one the day because everyone, certainly,
26:42
Speaker 2: in my experience, I haven't seen a campaign to get
26:46
Speaker 2: shareholders out and voting like this one for a very
26:50
Speaker 2: long time. So I mean, in terms of you have
26:53
Speaker 2: pitched to the private investor. We've already told to me
26:56
Speaker 2: what you've planned to do, But what is in it
26:57
Speaker 2: for them? We could attribute the closing of the knave
27:01
Speaker 2: descount to yourselves and say let's say that we say
27:05
Speaker 2: that's all down this SABA. At this point, most investors
27:09
Speaker 2: in these funds can exit or very close to enough
27:14
Speaker 2: occasionally a premium to spend the trust just by going into
27:18
Speaker 2: the market tomorrow and selling the shares. So what extra
27:23
Speaker 2: is in it for them if they vote for your
27:25
Speaker 2: changes rather than against your changes?
27:29
Speaker 4: So there are a few features. You're right.
27:31
Speaker 3: The small investor could sell a small amount of shares
27:33
Speaker 3: and get out at this price that now reflects the
27:36
Speaker 3: optimism that we will win.
27:38
Speaker 4: Right.
27:39
Speaker 3: And if they don't want to sell, that's because they
27:40
Speaker 3: want to give our new proposal, our new product to
27:43
Speaker 3: this UK Investment Trust, our opportunity Trust to benefit. They
27:48
Speaker 3: could go look at our ETF. The ticker is CEFS.
27:51
Speaker 3: It has an eight year track record of success. I
27:54
Speaker 3: just pulled it up as I'm talking to you now,
27:57
Speaker 3: and I'll just tell you that since twenty seventeen. In
28:00
Speaker 3: since twenty seventeen, it's total return is one hundred and
28:03
Speaker 3: twenty five percent and the KPC fund is down twelve
28:06
Speaker 3: percent over eight years. One lost twelve one maye hundred
28:09
Speaker 3: and twenty five. So you could look to that as
28:11
Speaker 3: a reason to stay in our proven track record of
28:14
Speaker 3: eight years. You could look at the why vote for us?
28:17
Speaker 3: If you vote against us, it's very possible that the
28:19
Speaker 3: discount will creep back into to the product. There's an
28:22
Speaker 3: example of a fund, the European Opportunities Trust EOT, where
28:27
Speaker 3: we told investors vote for US if you vote against us,
28:30
Speaker 3: we believe this fund will go back to a discount.
28:33
Speaker 3: It's sitting at minus fourteen as I speak to you,
28:35
Speaker 3: and they had a chance to exit at ninety nine
28:37
Speaker 3: at minus one, So there's protecting their own investment means
28:41
Speaker 3: voting for US if.
28:42
Speaker 4: They want to exit. Good for them.
28:43
Speaker 3: But what we find in the US John is that
28:46
Speaker 3: sometimes even if SABA didn't vote, we still would have
28:50
Speaker 3: had more votes. There's enough retail discontent. If you go
28:53
Speaker 3: through eight years and you underperform, or five years or
28:56
Speaker 3: three years, you're going to create an investor base that
28:59
Speaker 3: is to listen to other ideas, and unfortunately for the product,
29:03
Speaker 3: they don't have a mechanism to get out at an EV.
29:05
Speaker 3: We're their mechanism, we're their advocate. So there's a great
29:09
Speaker 3: reason for the retail investor to vote for us. Now
29:11
Speaker 3: I'm not naive. I know that they don't get to
29:13
Speaker 3: hear me on the phone, they don't get to get
29:16
Speaker 3: emails from me, but they do hear their manager saying
29:18
Speaker 3: that I'm going to cause death and destruction. And there's
29:21
Speaker 3: been a lot of misinformation said, which I will have
29:24
Speaker 3: cleared up by the time the votes are taken.
29:26
Speaker 2: Moving on to the boat, what you're planning to do,
29:30
Speaker 2: as I understand it, is if they vote for you,
29:33
Speaker 2: then clear out the old boats and replace them. And
29:35
Speaker 2: you've already discussed having two board members, one correct me
29:39
Speaker 2: if I'm wrong, a SABA board member, and the other
29:42
Speaker 2: one can have chosen by yourselves. The one issue is,
29:49
Speaker 2: as you've said, key governance is somewhat, if I understand
29:52
Speaker 2: you correctly, somewhat better than it is in the US,
29:56
Speaker 2: and two board members trust particularly whenever presumably each of
30:01
Speaker 2: these trusts would be going through quite a significant restructure.
30:05
Speaker 2: By the sounds of it, that sounds like a lot
30:09
Speaker 2: of work for those individuals and boats here more typically
30:15
Speaker 2: of more members what just can I answer to that?
30:18
Speaker 2: It feels if too is late.
30:20
Speaker 4: To that way, I agree with you and it will
30:23
Speaker 4: not remain too.
30:25
Speaker 3: We've done a lot since December eighteenth, and to ground
30:28
Speaker 3: everything up and put it in place, we didn't have the
30:31
Speaker 3: time to add thirty more directors to these seven funds.
30:35
Speaker 3: I think what you could do instead of listening to
30:37
Speaker 3: just my words is look at my actions in the US.
30:40
Speaker 3: In the US, we manage two funds. The funds have
30:43
Speaker 3: nine members each, eight of them are independent, and we
30:46
Speaker 3: changed the governance of those funds to be more friendly
30:51
Speaker 3: to the shareholder, less friendly to us as the manager.
30:53
Speaker 3: We did that in twenty twenty four with a fund
30:57
Speaker 3: we took over ticker SABA. We viewed it as we're
31:02
Speaker 3: much more investor in this product than manager of this product,
31:05
Speaker 3: and we want to show the managers what the best
31:07
Speaker 3: governance is. That's why, unlike what Joanna Sanderson or what
31:11
Speaker 3: Bailey Gifford didn't offer their investors in terms of liquidity,
31:14
Speaker 3: they became the manager and they trapped people. They didn't
31:18
Speaker 3: give them liquidity. We are giving substantial liquidity to six
31:21
Speaker 3: and full liquidity to the seventh. So we're going to
31:24
Speaker 3: in that same way of good governance, add a lot
31:26
Speaker 3: of independent directors. We also, if we create a merger
31:30
Speaker 3: of some of these funds, the independent directors will multiply.
31:34
Speaker 3: But there's only one of me. Thank goodness, there's not
31:36
Speaker 3: too me, right, can you imagine? So you're going to
31:38
Speaker 3: be adding independent directors simply through merger and.
31:42
Speaker 2: The terms that UK is coming into the UK? Is
31:44
Speaker 2: there a reason why you want to do it like
31:46
Speaker 2: this rather than just setting up like completely a new trust,
31:50
Speaker 2: launching a new trust to do this and I just
31:54
Speaker 2: give all up. I guess the investment trust sect on
31:56
Speaker 2: the UK as you see it.
31:58
Speaker 4: We might in the future.
32:00
Speaker 3: We've seen actually in the US our ETF continue to grow,
32:03
Speaker 3: so there is demand new money right to go into
32:06
Speaker 3: our products if you look up cefs and the AUM
32:09
Speaker 3: growth the last few years. But the main reason is
32:12
Speaker 3: because the sector is so beleaguered. I don't need to
32:15
Speaker 3: reado headlines from Bloomberg and the Ft excoriating the performance,
32:21
Speaker 3: the discount, the seeming inability for that discount to come
32:25
Speaker 3: back for three years. So there is such a negative
32:28
Speaker 3: view of closed in funds in the US and investment
32:30
Speaker 3: trusts in the UK that actually no one's really been
32:33
Speaker 3: able to bring a new fund.
32:34
Speaker 4: In the US.
32:35
Speaker 3: Bill Lackman tried to bring a closed end fund and
32:37
Speaker 3: ultimately shelved it. That we may come back with some
32:40
Speaker 3: new ideas, and he's incredibly clever, but even he was
32:43
Speaker 3: not able to.
32:43
Speaker 4: Bring one, to bring one fresh.
32:45
Speaker 3: Unfortunately, the market is in such a bad place that
32:48
Speaker 3: I think that would take another year of rehabilitation, which
32:52
Speaker 3: it cannot be argued. We can get things wrong, I'm
32:55
Speaker 3: often wrong. It cannot be argued in my view that
32:58
Speaker 3: we are not the most positive influence on the investment
33:01
Speaker 3: trust market in the UK, because first we bought two
33:03
Speaker 3: billion when institutions in retail wanted out. Second, we are
33:08
Speaker 3: advocating for better governance, and five of the seven funds
33:11
Speaker 3: as I talk to you today have announced change that
33:14
Speaker 3: will be positive for shareholders that they would not announce
33:17
Speaker 3: for the three years that we were asking them to.
33:19
Speaker 3: But only in the last two months have they made
33:22
Speaker 3: these funds made these five announcements. And so we're making
33:25
Speaker 3: governance better, We're pushing prices higher through activism, and we
33:29
Speaker 3: are buying We're going to be buying a lot more
33:31
Speaker 3: of it. So we are the most positive influence in
33:33
Speaker 3: the space. That's not what I came here to do.
33:35
Speaker 3: I came here to make money for my clients. But
33:37
Speaker 3: I'm quite excited to take again portfolios of Tesla and
33:43
Speaker 3: super micro Computer, sell them, maybe not SpaceX as we said,
33:47
Speaker 3: sell them and invest it back into the UK trust
33:51
Speaker 3: market and for SAPA to expand its footprint. We are
33:53
Speaker 3: going to be hiring people in the UK and I'm
33:56
Speaker 3: going to be over every month for the next few months.
33:59
Speaker 2: Into the seven that are wind the menu. Is there
34:03
Speaker 2: one that you're particularly keen to you get you get
34:05
Speaker 2: under control or is it much of a muchness As
34:09
Speaker 2: far as you're concerned.
34:11
Speaker 3: My view is let the voters decide. I don't have
34:14
Speaker 3: any animist towards any manager where I'm like, I really
34:17
Speaker 3: want to win that one. We decided, you know, maybe
34:20
Speaker 3: a question you haven't asked, why did you do seven
34:22
Speaker 3: instead of two? Why did you do seven instead of one?
34:24
Speaker 3: Hopefully you want to ask why did you do seven
34:27
Speaker 3: instead of fourteen?
34:28
Speaker 4: Right?
34:28
Speaker 3: Seven was quite a load. The reason we did it,
34:32
Speaker 3: I'll tell you it's interesting. I've seen everything. I've been
34:35
Speaker 3: in this industry since I was fifteen years old. I've
34:37
Speaker 3: seen good behavior, bad behavior. We have an investor for
34:42
Speaker 3: a decade in Europe that will not invest in activists.
34:45
Speaker 3: They just have a rule. We don't want to be
34:47
Speaker 3: a part of activism. You might cause a steel mill
34:49
Speaker 3: to shut down, you might cause whatever. But for SABA
34:52
Speaker 3: we make an exception because you're pushing back against acid
34:56
Speaker 3: managers that are not treating the investor as well, and
34:59
Speaker 3: we want to be a part of that. And so
35:01
Speaker 3: in a sense it's eschief friendly for us to be
35:04
Speaker 3: pushing for better governance, which we inaudably are. And this
35:07
Speaker 3: whole space is one where I've seen everything, and so
35:10
Speaker 3: why seven instead of one? I won't necessarily say what
35:14
Speaker 3: all of those things are, but we felt if we
35:16
Speaker 3: only did one, those other six, not particularly those, but
35:21
Speaker 3: other managers might put up roadblocks, might do things that
35:24
Speaker 3: are entrenching that would then hurt our investment, hurt all
35:28
Speaker 3: other shareholders' investment. And we wanted it to be a
35:30
Speaker 3: big bang to take the industry by storm. And what
35:33
Speaker 3: I think you're going to see, because people have now
35:35
Speaker 3: made lists of the other twenty funds were involved in.
35:38
Speaker 4: Here's my prediction.
35:39
Speaker 3: You can have me back in a year if you'll
35:40
Speaker 3: take me is those other twenty funds will have instituted
35:44
Speaker 3: a change that helped the price go up, helped retirees
35:47
Speaker 3: and SAVA investors alike make money, and the governance will
35:51
Speaker 3: be better, but some of them can take action to
35:56
Speaker 3: make the governance worse. I'm going to give you one
35:58
Speaker 3: example in that case EOT where we came in. We've
36:02
Speaker 3: been very quiet in London. We came in and said
36:05
Speaker 3: there's a continuation vote. We're not being activist. There's a
36:07
Speaker 3: natural continuation vote should the manager get to keep the assets?
36:11
Speaker 4: And we said we're going to vote against it. And
36:14
Speaker 4: after that the manager announced some sort of buyback.
36:17
Speaker 3: We said the buyback's not big enough and if you
36:20
Speaker 3: vote against us, this thing will go back to a
36:22
Speaker 3: big discount. Institutions voted against us. There's an old boys
36:26
Speaker 3: network that it does exist in the UK. I'll spare
36:30
Speaker 3: you some of those details. And they voted against us,
36:33
Speaker 3: and instead of getting out at ninety nine, I think
36:35
Speaker 3: they had a fiduciary requirement to vote for getting out
36:40
Speaker 3: at ninety nine because it was so clear that it
36:42
Speaker 3: would go to a discount again. It went to a
36:44
Speaker 3: fourteen discount. Now, what has happened since then here's the punchline.
36:48
Speaker 3: The manager is now the third biggest owner of this fund,
36:52
Speaker 3: so I'm not calling him out by name, but his
36:54
Speaker 3: name is Alexander Darwell, so I am calling him out
36:56
Speaker 3: by name title too. And he has bought seven point
37:00
Speaker 3: eighty four percent of the fund. And that means that
37:03
Speaker 3: an activist will have a very hard time because if
37:06
Speaker 3: the activist comes in and buys five, Darwell can buy
37:09
Speaker 3: another five. And so that is why investors are sitting
37:12
Speaker 3: at a fourteen discount in that fund. But the USA
37:15
Speaker 3: Fund of Bailey Gifford sits right now at no discount
37:18
Speaker 3: because investors are expecting we're going to win, and they
37:21
Speaker 3: liked the idea of having a choice of staying with SABA,
37:24
Speaker 3: which is one awards for activism. Institutional Investor gave us
37:28
Speaker 3: best Activists the last two years. We won best Credit
37:31
Speaker 3: Fund two years ago. And I think people also know
37:34
Speaker 3: that when they invest in these funds, they're investing in
37:37
Speaker 3: my attention and my partner's attention, not team to member
37:40
Speaker 3: at number forty seven in a group of one thousand people.
37:43
Speaker 3: So those two contrasts of good governance versus creating obstacles,
37:48
Speaker 3: I think is why you can imagine we went for
37:50
Speaker 3: seven instead of one.
37:51
Speaker 2: Yeah, so that's interesting you've reased that because I Boy's
37:54
Speaker 2: going to ask you clearly, So this seven is not
37:58
Speaker 2: the end? Is far you have concerned? And you just
38:01
Speaker 2: said there, what is there another twenty trusts that you
38:04
Speaker 2: are involved in?
38:05
Speaker 4: Is that right?
38:06
Speaker 3: That's what people have put up on in messages And
38:10
Speaker 3: I don't know if it's twenty or twenty six, Yeah,
38:12
Speaker 3: but it ain't three.
38:13
Speaker 2: So from that point of how many more are you taralgetting?
38:17
Speaker 4: Is this?
38:18
Speaker 2: Is this just going to carry on? Or have you
38:20
Speaker 2: got a specific kind of end game in mind.
38:24
Speaker 3: I'm not targeting anybody. I'm trying to make money for
38:27
Speaker 3: my investors, and what's really nice is I get to,
38:30
Speaker 3: in doing so, make money for all the shareholders of
38:33
Speaker 3: these funds. We haven't taken green mail. Most of you
38:35
Speaker 3: probably know what green mial is. We haven't taken special
38:37
Speaker 3: deals which we've been offered by the way in the
38:40
Speaker 3: past and in a situation in Canada, and we we're
38:44
Speaker 3: here for our investors. We're not here to make trouble.
38:47
Speaker 3: And so what I hope happens is that we win
38:50
Speaker 3: a bunch of these and then the UK wakes up
38:53
Speaker 3: and it's.
38:53
Speaker 4: And the managers start doing things that are pro shareholder. Now,
38:56
Speaker 4: what is that? Okay? What could they do so that
38:58
Speaker 4: we don't do this again?
39:00
Speaker 3: If they go in the marketplace instead of us going
39:03
Speaker 3: in the marketplace and they sell a bit of IBM
39:05
Speaker 3: and they sell a bit of T and they take
39:08
Speaker 3: that cash and they buy themselves. They buy back their
39:11
Speaker 3: own shares at a fourteen discount. They are immediately building
39:16
Speaker 3: net acid value. If they retire shares that were at
39:19
Speaker 3: one hundred at eighty six, they are building net acid value.
39:22
Speaker 3: They're making money for their investors. Why don't they do that?
39:25
Speaker 3: Pure and simple greed because they don't want their fund
39:28
Speaker 3: to shrink. They don't want to make their fee smaller,
39:31
Speaker 3: and so they've been greedy. In the case of EESCT,
39:35
Speaker 3: one of the funds in our campaign, ESCT approved a
39:39
Speaker 3: big buyback and that never consummated even more than a
39:44
Speaker 3: third of it. That's a Janis Henderson fund. And I
39:47
Speaker 3: think there's like a lot of irony going on. They're
39:49
Speaker 3: complaining now that we have these big stakes, but they
39:51
Speaker 3: didn't take the steps they could have bought these stakes.
39:54
Speaker 3: They could have made money for their shareholders. And the
39:56
Speaker 3: great irony of Janis Henderson, by the way, is that
40:00
Speaker 3: they themselves, okay, they themselves voted to liquidate a UK
40:04
Speaker 3: investment trust run by one of the most famous activists
40:09
Speaker 3: in the US called Nelson Peltz. The fund is called
40:12
Speaker 3: Tryon and an incredible hypocrisy. Janie Henderson voted to liquidate
40:18
Speaker 3: try On. It liquidated, and Nelson Pelts sits on the
40:22
Speaker 3: board of Tryon. And I just had a wonderful on
40:24
Speaker 3: the board of Janie Henderson. I just had a wonderful
40:26
Speaker 3: call with him. And I think this idea of SABA
40:30
Speaker 3: has this personal interest in taking over these funds, their
40:33
Speaker 3: own personal interest in keeping these funds despite in some
40:36
Speaker 3: cases terrible performance, their own self interest is laid bare.
40:39
Speaker 3: So I know that's like a very long answer full
40:41
Speaker 3: of chock full of ironies. But I think we're we
40:44
Speaker 3: are the positive change. And if they what they can
40:47
Speaker 3: do to forestall activism is fix their funds so that
40:50
Speaker 3: SABA doesn't.
40:51
Speaker 2: Have to I mean, from that point of why are
40:53
Speaker 2: the challenges that people perforward? Is this basically and I said,
40:57
Speaker 2: cothered an exercise because we didn't We just talked about
41:00
Speaker 2: fees because obviously you guys and fees as well from
41:04
Speaker 2: the kind of amount of the assets that you've got
41:06
Speaker 2: under management. I think I get the impression that you
41:10
Speaker 2: already answered that one to be honest in the last response.
41:13
Speaker 2: But do you have a response to that.
41:16
Speaker 4: Yeah.
41:17
Speaker 3: Look, by the way, it's very clear Bloomberg isn't throwing
41:20
Speaker 3: softballs at me. These are like challenging questions. So are
41:23
Speaker 3: we trying to gather assets? We could liquidate the funds
41:27
Speaker 3: like Janis Anderson did to Nelson Peltz. So we're trying
41:29
Speaker 3: to keep it alive. What is keeping it alive?
41:32
Speaker 1: Do?
41:32
Speaker 3: What's the positive benefit? I'm going to take that capital
41:36
Speaker 3: and invest it back into the investment trust sector, which
41:38
Speaker 3: should have a positive effect on the sector.
41:41
Speaker 4: And there's demand for what we do.
41:43
Speaker 3: We run a business, and if investors, if investors don't
41:46
Speaker 3: want it. In the case of the Bailey Gifford KEPC
41:49
Speaker 3: fund and another fund run by Janis, by the way,
41:52
Speaker 3: they were stuck. Bailey Gifford kept one hundred percent of
41:55
Speaker 3: them one hundred percent of the fees. We're going to
41:57
Speaker 3: give people who want their money back effectively some most
42:02
Speaker 3: or all of their money back in a way that
42:04
Speaker 3: should answer the question for itself. So we were holding
42:06
Speaker 3: ourselves to a much higher standard than these very managers.
42:09
Speaker 3: And I think that when you have two hundred and
42:11
Speaker 3: seventy somethingter trust in the UK mostly underperforming. One of
42:16
Speaker 3: the things that I had a great conversation with the
42:19
Speaker 3: head of the industry Group AIIC for UK Investment trust
42:23
Speaker 3: and he said, one of the great things about investment
42:25
Speaker 3: trust is they can hold less liquid assets and even
42:28
Speaker 3: if music royalties hypnosis became a problem until it wasn't,
42:32
Speaker 3: there is real benefit because you couldn't hold that in
42:35
Speaker 3: an ETF structure. And I said, I agree, and actually
42:38
Speaker 3: investment trusts are not very liquid and are a perfect
42:41
Speaker 3: thing to be held in investment trusts, right. We really
42:45
Speaker 3: think that to have an offering like ours is bringing
42:48
Speaker 3: new ideas to a one hundred and fifty year old space.
42:51
Speaker 3: And it's about time that there was an opportunity for
42:54
Speaker 3: some of your listeners to say, hey, this guy doesn't
42:57
Speaker 3: it sounds like he clearly from the reaction, he's getting
42:59
Speaker 3: stuffed and he's already gone five of the managers to
43:02
Speaker 3: announce things they woudn't announced for the first three years.
43:04
Speaker 3: So maybe I want to invest alongside of that in
43:07
Speaker 3: a reasonable way.
43:08
Speaker 2: One thing I wanted to ask you, and this is
43:10
Speaker 2: slightly different to the other question of actually you're you're
43:12
Speaker 2: a gamer as I understand it, and I know that
43:15
Speaker 2: some famous fund managers like ol Gross for example, always
43:18
Speaker 2: talk about poker as an analogy for investing your game
43:23
Speaker 2: a choice used to make chess. And I was just
43:25
Speaker 2: wondering what you feel your background there, because you were
43:29
Speaker 2: like number two in the US at one point, Is
43:31
Speaker 2: that right?
43:31
Speaker 4: Not quite? I was number two for age fifteen sixteen?
43:35
Speaker 2: Oh yes, yeah, yes, a child prodigy, a bit like
43:39
Speaker 2: a rowin chancellor here. But so, how do you think
43:41
Speaker 2: chess has influenced your investment style? Would you bring from
43:44
Speaker 2: chess to invest in?
43:46
Speaker 3: By the way, Rachel Reeves, I got to meet her
43:48
Speaker 3: one time because of chess.
43:50
Speaker 4: It was not a very.
43:51
Speaker 3: Memorable meeting, by the way, and we were in a
43:54
Speaker 3: group and she came along and we went to Pete Express.
43:56
Speaker 3: So I have a long history with chess and Rachel Reeves. Actually,
44:01
Speaker 3: because of some of the changes caused a lot of
44:03
Speaker 3: discontent in your equity markets and sellers of the of things,
44:07
Speaker 3: including investment trust, I want to say that the investment.
44:10
Speaker 3: Trust problems are not problems only of their own making.
44:14
Speaker 3: Let's leave it at that, since I was there to
44:16
Speaker 3: stay in good stead with her, look chess, blackjack, poker.
44:19
Speaker 3: I never really played poker till I was thirty or so.
44:23
Speaker 3: And an't you Jane, just a brilliant man. He called
44:26
Speaker 3: me and said, I got you invited to Warren Buffett's
44:28
Speaker 3: poker tournament. Do us proud? And I said, on't you?
44:31
Speaker 3: I think you confused me with confused poker with blackjack
44:34
Speaker 3: or poker with chess. I don't play poker. And he said,
44:38
Speaker 3: you called me from the airport in Omaha, Nebraska. I
44:41
Speaker 3: just met Warren Buffett. I said I don't play poker,
44:43
Speaker 3: and he said, now you do, and he hung up
44:45
Speaker 3: the phone on me.
44:46
Speaker 4: And I ended up through a lot of luck.
44:48
Speaker 3: I start this conversation with you talking about luck, I
44:51
Speaker 3: ended up with a lot of luck. I was in
44:53
Speaker 3: one case down to one card to come, and I
44:55
Speaker 3: was three out of four to lose, and I won
44:57
Speaker 3: a Maserati and I didn't have a driver's licen so
45:00
Speaker 3: I was that New York kid that didn't drive. So
45:02
Speaker 3: I had to go get my driver's license. I have
45:04
Speaker 3: this history with games which has been just fantastic. But
45:07
Speaker 3: I think, for the purpose of this conversation, closed end
45:11
Speaker 3: funds and UK investment trusts are very similar to blackcheck
45:15
Speaker 3: because you know the discount.
45:17
Speaker 4: You know what we're talking. You know, no one's disagreeing.
45:19
Speaker 3: Should Facebook stock be at five hundred or four hundred?
45:22
Speaker 3: This is we take the price as it is, and
45:25
Speaker 3: we still know what the discount or a premium is.
45:28
Speaker 3: We know what the discount is. And in blackjack, we
45:30
Speaker 3: know what the count is and we know what the
45:32
Speaker 3: odds are. And this is the one arbitrage what I
45:35
Speaker 3: don't want to leave you with. This is the one
45:36
Speaker 3: arbitrage where I can control my own destiny because a
45:40
Speaker 3: share is a vote, and if I get enough shares
45:42
Speaker 3: and I get enough followers, I can actually get the
45:45
Speaker 3: manager to be replaced, and that manager should not want
45:49
Speaker 3: to be replaced. We've only done it twice in twelve years.
45:53
Speaker 3: What we're doing now in the UK we have done
45:55
Speaker 3: twice in twelve years in the US despite having more
45:58
Speaker 3: than seventy campaigns. So why are we doing it now
46:01
Speaker 3: here in the UK. Because the managers did not listen
46:04
Speaker 3: to us. We came to them. We said you should
46:06
Speaker 3: do with an aggressive buyback, you should do with a tender.
46:09
Speaker 3: You need to narrow your discount, And for three years
46:11
Speaker 3: the discounts were not narrowed. And so in blackjack. In
46:15
Speaker 3: the end, you get to know if you played down
46:17
Speaker 3: to the very last card, you would know exactly what
46:19
Speaker 3: it is here. If we owned fifty one percent of
46:22
Speaker 3: the shares, we would know exactly what the outcome would be.
46:25
Speaker 4: But let it be left to the voters. The managers
46:27
Speaker 4: get to call them. We don't.
46:28
Speaker 3: So I'm here with you in this lovely conversation to
46:31
Speaker 3: tell the retail investors we are here alongside you. We
46:35
Speaker 3: have your interest just like you have our interest, which
46:37
Speaker 3: is a higher price. The manager's interest is to keep
46:41
Speaker 3: their fees and to excuse their underperformance.
46:44
Speaker 2: If you get one message to get to the rest
46:47
Speaker 2: of the investment trust sector, she's someone open the sentence.
46:51
Speaker 3: Look, let me say this. I would bet what are
46:55
Speaker 3: they saying you? It's dollars to donuts that the other
46:58
Speaker 3: twenty funds that we owned have had meetings about.
47:02
Speaker 4: How to get their share price up, and you did.
47:05
Speaker 4: I don't know you did, but I do know you did.
47:07
Speaker 3: Logically you did and think about this small investor that
47:12
Speaker 3: we are a positive agent for change and we are
47:15
Speaker 3: going to invest not just the two billion we have
47:17
Speaker 3: so far, but we are going to invest more back
47:20
Speaker 3: into the sector. And what you will see which I'll
47:23
Speaker 3: give you an anecdote. In the US, there is a
47:25
Speaker 3: fund the ticker is NHS Nancy Harry Sam. They after
47:30
Speaker 3: quite a bit of back and forth, they did a tender,
47:33
Speaker 3: they did listen to us, and after that their shares
47:37
Speaker 3: traded so much better that they were able to issue
47:39
Speaker 3: more shares two different times. And so looking out five
47:42
Speaker 3: years from five years later, their fund is now bigger
47:45
Speaker 3: because we help them fix their fund after a lot
47:48
Speaker 3: of back and forth that they otherwise wouldn't have had.
47:51
Speaker 3: This is about too many sellers, not enough buyers. If
47:54
Speaker 3: you buy your back your shares, if we buy back
47:56
Speaker 3: your shares, you will be able to grow the UK
47:58
Speaker 3: Investment trus space. And so that's my message to the market,
48:01
Speaker 3: is that I know the seven of you don't think
48:03
Speaker 3: we come in peace, but for sure there are hundreds
48:06
Speaker 3: of thousands of small investors that have benefited every time
48:09
Speaker 3: from our activism. Whereas in normal activism, if you try
48:13
Speaker 3: to turn jcpenny into Apple Computer. You can actually do
48:16
Speaker 3: quite a bit of damage closed end fund and investment
48:18
Speaker 3: trust activism, especially because we're giving liquidity. You can take
48:22
Speaker 3: that money you want to be in small stocks, you
48:24
Speaker 3: don't want what we do, take your ninety nine percent
48:27
Speaker 3: and go buy another one in eighty nine percent, Rinse, repeat.
48:30
Speaker 3: That's the opportunity for the small investor who doesn't want
48:33
Speaker 3: SABA capital.
48:34
Speaker 4: After this is all over.
48:36
Speaker 3: If you don't, okay, fine, take your ninety nine vote
48:39
Speaker 3: for us, get your ninety nine, go buy the exact
48:41
Speaker 3: same thing in eighty nine and maybe find an ETF
48:44
Speaker 3: that has lower fees. So we're really giving investors options
48:47
Speaker 3: whereas they were stuck and a lot of institutions had
48:50
Speaker 3: no choice but to sell. And that's a sorry situation.
48:53
Speaker 3: And even those ones, I hope they support us, they
48:56
Speaker 3: should be very happy for our involvement.
48:58
Speaker 2: Well, you just giving me the head. It's going to
49:00
Speaker 2: be who boys, Wayinstein fixed the NHS. I think that'll
49:04
Speaker 2: be very click beity here. Thanks a lot for your team.
49:07
Speaker 2: The one other thing with ASKI boys is so say
49:10
Speaker 2: we look back. You went out here three years out.
49:13
Speaker 2: You'll be judged doing Saba's three year performance from now.
49:18
Speaker 2: What would count as success.
49:20
Speaker 3: First that investors were able to get that exit, and
49:25
Speaker 3: that if they then look at the ones who stayed in,
49:27
Speaker 3: that they would find something that I truly believe. I
49:30
Speaker 3: look at all the businesses that SABA does, because we
49:33
Speaker 3: do a lot more than investment trusts and closed in
49:36
Speaker 3: funds going I look across the businesses. None of the
49:38
Speaker 3: other businesses do I have any sort of control over
49:41
Speaker 3: the future. Predicting the future is hard, but this business
49:46
Speaker 3: is something that is far easier. If you buy something
49:49
Speaker 3: at a fifteen discount, and sixty times in a row,
49:51
Speaker 3: you were able to get that discount to shrink, rinse, repeat,
49:54
Speaker 3: you were creating value for your investors. So success to
49:57
Speaker 3: me three years later would be that what we be
50:00
Speaker 3: able to do for the last twelve years for our
50:02
Speaker 3: clients is repeatable. I think it's even more repeatable because
50:06
Speaker 3: now we carry a bigger stick. We have six billion
50:09
Speaker 3: invested in the space globally, and that because of that,
50:12
Speaker 3: managers will do the right thing and we will deliver
50:15
Speaker 3: super normal games to our investors because discounts will narrow
50:20
Speaker 3: because of us.
50:21
Speaker 4: That's my goal.
50:22
Speaker 3: We might fall short, but for the last eight years,
50:24
Speaker 3: it's been If you look at that et off, it's
50:26
Speaker 3: been a great ride.
50:28
Speaker 2: Okay, thanks very much, boys, really appreciate your time, my pleasure.
50:37
Speaker 2: Thanks for listening to this week's Medon Talks Money. If
50:40
Speaker 2: you like a show, rate and review and subscribe whatever
50:42
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50:45
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50:51
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50:55
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50:59
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51:02
Speaker 2: special thanks to bo Has Weinstein