The Blog
MS MILLENNIAL MONEY MUSINGS – Turning Shareholders into Superfans
By Sarah Penney, Ms Millennial Money
In the world of activist investing, an intriguing story has been unfolding since December. US hedge fund Saba Capital has acquired significant stakes in seven underperforming UK investment trusts, totalling around £1.5 billion – requesting emergency shareholder meetings to replace existing directors and exploring options like cash exits, trust mergers, or taking over management themselves. (Read more from FT Adviser)
The Saba Saga: A Closer Look
Saba Capital’s approach is straight out of the US hedge fund playbook. They’ve carefully kept their stakes below the 29.9% threshold to avoid mandatory takeover offers, while still wielding considerable influence. This move will likely send shockwaves through the UK investment trust landscape, highlighting the vulnerability of underperforming funds to activist investors.
The trusts in question have gone into full-on panic mode, frantically communicating with shareholders – particularly retail investors – urging them to vote in upcoming emergency meetings. But here’s the million-pound question: How can companies expect retail investors to rally behind them in times of crisis if they’ve never bothered to engage before?
Building Your Investor Fan Base
It’s all about laying the groundwork. If companies work from day one to turn their shareholders into their biggest fans, they’ll find themselves with a dedicated army of supporters when they need them the most. Think of it as cultivating a Swiftie-style following for your company.
Unfortunately, these seven trusts are facing an uphill battle, having little capital in the supporters’ bank. They’re starting from scratch in attempting to engage their retail investors and encourage them to show support with their votes.
When considering how to turn retail shareholders into superfans, putting on your retail investor hat and asking yourself the following questions is a simple yet effective tactic for putting a company on the right track:
- Am I a fan of this company?
- Am I fully invested in the company strategy?
- Do I understand the company strategy?
- Would I immediately support a resolution if asked?
If you answer ‘no’ to any of these questions, then it’s likely there’s a disconnect between the company and its investors. Thinking about engagement on a human level and considering how a company could speak to you to get you on the path to super fandom is the road best followed. Look at companies like Nvidia, with massive retail support, CEO Jensen Huang is a public and personable face of the company, interacting personally, and in a way that’s authentic, with investors and consumers.
Bringing Investor Relations into 2025
The Saba Capital issue has highlighted to us just how traditional investor relations still are in the UK.
Paper-based communication still seems to be king – TEA HQ has been flooded with communications from the trusts in question. This is expensive, environmentally unfriendly, and anachronistic.
While many existing shareholders may be from the Boomer and Gen X generations, particularly those of investment trusts, it’s important to consider the future makeup of the investor base.
Gen Z are now the most actively engaged investors – are they likely to be swayed by a stack of papers landing on their doormat? Probably not. They’re more likely to engage if approached via the digital channels through which they’re already engaging with their portfolios.
Embracing Social Finance (So-Fi)
Investing is increasingly social. Conversations are happening in the digital sphere, and to transform passive investors into fans, companies need to occupy these spaces. Moving from traditional finance (trad-fi) to social finance (so-fi) has three key benefits:
- Reduce costs
- Gain fans
- Achieve company aims
What more do you want?
The Saba Capital Saga: A Case Study in the Making
As voting deadlines for all seven trusts approach before the end of January, TEA will be closely observing this situation as a valuable case study in investor engagement. Our CEO, Sheryl Cuisia (SherylXInvest), is a shareholder in all seven trusts and she will be engaging and reporting back – more from her soon!
The trusts in question are:
- Baillie Gifford US Growth
- CQS Natural Resources Growth & Income
- Edinburgh Worldwide
- European Smaller Companies Trust
- Henderson Opportunities Trust
- Herald Investment Trust
- Keystone Positive Change
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