London: A major restructuring move in the UK investment trust landscape has collapsed after U.S.-based activist investor Saba Capital Management blocked a proposed merger between two Baillie Gifford-managed trusts. The decision has reignited tensions between the activist fund and the trusts’ boards, raising questions about governance, performance, and the future direction of the sector.
The proposal sought to merge the Baillie Gifford US Growth Trust with the Edinburgh Worldwide Investment Trust, forming a combined vehicle focusing on high-growth listed and private companies, primarily in the United States. Both trusts are managed by Baillie Gifford, one of the UK’s most prominent fund managers.
Under the plan, shareholders would have received an attractive exit option up to 40% cash at net asset value (NAV) along with promises of enhanced scale, better liquidity, and cost efficiencies. Both trust boards had strongly endorsed the merger, describing it as the “best available path” for delivering sustainable value.
However, Saba Capital, which holds nearly 29% of the US Growth Trust, used its substantial stake to veto the deal. Owing to shareholder voting rules, Saba’s opposition alone was sufficient to block the merger entirely.
Saba’s move reflects broader dissatisfaction with the trusts’ performance and governance. The hedge fund has repeatedly criticised the boards particularly at Edinburgh Worldwide arguing that long-term underperformance demands new leadership and strategic overhaul.
Earlier attempts by Saba to influence board composition were overwhelmingly rejected by non-Saba shareholders, with over 98% voting against its proposed changes. The latest development, however, strengthens Saba’s leverage and places renewed pressure on the trusts to demonstrate improved performance.
Following the collapse of the merger plan, the Baillie Gifford US Growth Trust board expressed deep disappointment, stressing that the merger would have benefited all shareholders including Saba.
The board argued that combining the two trusts would have created a more competitive and efficient investment vehicle, while offering shareholders a rare opportunity to exit at NAV. It also insisted that it will continue exploring options that protect long-term shareholder interests, hinting at future consultations or alternative restructuring proposals.
The blocked merger comes as activist pressure intensifies across the UK investment trust sector. With widening discounts, weak performance across several growth-focused trusts, and increased investor frustration, activists like Saba are becoming more influential.
This latest intervention underscores the shifting power dynamics:
• Large shareholders can now directly stall or reshape high-profile strategic plans.
• Boards face growing scrutiny over discount control, governance, and alignment with investor expectations.
• Fund managers must adapt to an environment where activism is becoming the norm rather than the exception.
Both trusts are now left navigating an uncertain path. Analysts suggest a range of possible outcomes including further activist pressure, strategic reviews, or fresh proposals aimed at unlocking shareholder value.
For Baillie Gifford, the setback reinforces the need for clearer communication and stronger performance to maintain investor confidence. For Saba, the victory marks another milestone in its campaign to reshape UK investment trusts in favour of what it views as stronger governance and value realization.
As the dust settles, the episode stands as a reminder of how swiftly shareholder dynamics can shift and how decisively a single large investor can transform the course of a major corporate decision.