Herald Investment Trust Share News (HRI)

(Alliance News) - Keystone Positive Change Investment Trust PLC on Tuesday said Saba Capital Management LP has "dramatically overstated" its underperformance, as Saba aims to drive management shake-ups at several "underwhelming" firms in its portfolio.

On Monday, Saba criticised Keystone, an Edinburgh, Scotland-based investor in socially and environmentally-conscious companies, after Keystone urged its investors vote against Saba's proposals.

"It is appalling that KPC Chair Karen Brade has overseen cumulative underperformance of nearly 130% since assuming her role in 2018 – a staggering loss and destruction of wealth for retail holders and retirees. Contrary to KPC’s fearmongering tactics, Saba has an award-winning track record in closed-end activism that has provided liquidity, low fees and better management to deliver long-term value for all shareholders."

Responding to the claim on Tuesday, a spokesperson for Keystone said: "Saba has dramatically overstated the company’s underperformance. This is yet another example of this US hedge fund’s disingenuous tactics to influence other shareholders and allow them to take control for their own self-interest.

"The Keystone board accepts that the company has been through a challenging period of performance against a difficult backdrop and has already taken steps to address this and provide certainty and options for all shareholders including an uncapped cash exit via a proposed scheme. It is vital that shareholders come out to vote against Saba’s demands," it said.

Last month, Saba called on investors at seven trusts to oust current management after "underwhelming" shareholder returns. Saba has been steadily accumulating shares in all seven, building stakes of between 19% and 29%.

The affected firms are: Edinburgh Worldwide Investment Trust PLC, Baillie Gifford US Growth Trust PLC, CQS Natural Resources Growth & Income PLC, Keystone Positive Change Investment Trust PLC, European Smaller Cos Trust PLC, Henderson Opportunities Trust PLC, and Herald Investment Trust PLC.

"We believe that the current boards have failed to hold the investment managers accountable, which is why we want to offer you the opportunity to elect new directors with a concrete plan to deliver shareholder value," Saba said in a letter to shareholders.

This left Saba with "no choice" but to take the "extraordinary" step of requisitioning a general meeting for each of the seven trusts, the investor said. Saba has requested meetings are scheduled by early February 2025 at the latest.

"We believe that the boards have not minded the trading gap, which is why we want to offer you the opportunity to elect new directors with a concrete plan to deliver shareholder value," added Saba founder and former Deutsche Bank banker Boaz Weinstein.

Keystone on Monday said Saba's resolutions "would be highly detrimental to the interests of all other shareholders".

It added it has already proposed "a credible plan" of reconstruction and winding-up the company which would allow shareholders to realise their investment or rollover into the Baillie Gifford Positive Change Fund.

Keystone said this aligns with Saba's own prior request for a cash exit by the first quarter of 2025.

"Saba is now intent on disrupting the scheme and taking control of the company for its own commercial self-interest", Keystone said. It said blocking the board's proposal will cause additional costs, delay and uncertainty for shareholders.

Saba founder Weinstein shot back at Herald Investment Trust on Monday, after Herald on Friday asked its shareholders to reject Saba's shake-up.

Herald, which invests in firms in technology and communications, believes its strategy has "been highly successful over the long term".

"The board believes that, since its inception, Saba has materially underperformed Herald," Herald said. "Your board believes that if Saba gains control and seeks to implement a different strategy, significant value could be lost for shareholders as a result of forced selling of parts of the portfolio."

Herald pointed out Saba had "failed to provide concrete details" of its proposals and planned to "take control of the company for its own economic benefit and to change the company's investment strategy."

On Monday, Saba argued it was the outperformer, not Herald.

"While Katie Potts has delivered strong returns over most of her three-decade tenure managing HRI, we’re now in 2025 and the board must be held accountable for the Trust’s exceptionally poor returns during the last three years. Despite HRI beginning 2024 with its largest position in Super Micro Computer – a company that experienced a huge surge, rising more than 300% – the Trust significantly underperformed its benchmark. This underperformance is attributed to Ms. Potts’s mismanagement of both the Super Micro Computer position and the overall portfolio."

"In stark contrast to the Saba Closed-End Funds ETF delivering a 46.0% gain over the last three years, HRI posted a 9.7% NAV loss. It is therefore unsurprising that HRI has resorted to baseless attacks on Saba's track record as well as inaccurate claims about our nominees’ independence and their plans to deliver substantial liquidity and stronger long-term returns.

"The reality is that CEFS has outperformed HRI over every relevant time period since its launch in 2017. Given our 20.9% ownership of HRI (compared to the current board holding under 0.05%), it is absurd to suggest that we would favour a fire-sale of the very assets in which we are the single-largest shareholder. We fear the recent progress made on the narrowing of the discount will be reversed if shareholders do not support Saba’s campaign to reconstitute the board with new directors who will truly mind the gap."

Keystone Positive Change Investment Trust was down 1.5% at 251.10 pence in London on Tuesday afternoon.

Herald Investment Trust shares were down 0.2% at 2,500.00p.

By Michael Hennessey, Alliance News reporter

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