The showdown between rebel shareholders and activist Nelson Peltz’ Trian Investors (TI1 ) is hotting up with a group of independent investors demanding broking giant Jefferies rule out voting in next month’s extraordinary general meeting.

Invesco, Janus Henderson, Global Value Fund and Pelham Capital formed a committee in June to requisition the EGM and overhaul the TI1 board which they say let down shareholders last summer when the fund’s investment remit was broadened and diluted.

Last week the company published a circular and set a date of 5 August for the meeting, prompting the group to resume their criticism of the way TI1 is run and to raise the stakes for New York-listed Jefferies (JEF), whose business relies on the support of institutional investors.

One of the group’s main grievances is that Jefferies, joint broker to TI1 since its 2018 flotation, bought 13.6% of the shares in the initial public offer (IPO) so that the fund could achieve its minimum size and proceed. It then used its stake to vote in support of big changes put forward by the fund manager at last year’s annual general meeting. 

One key resolution turned TI1 into a permanent capital fund in which investment profits from activist campaigns would be reinvested rather than returned to shareholders, which the investors regarded a ‘defining feature’ when they backed its £270m launch. The vote narrowly passed by 52% to 48%.

Robert Ogilvy Watson, the rebels’ legal adviser, said as TI1’s financial adviser and broker, Jefferies stood to gain from this change as it would likely prolong the time over which it would need its investment banking services. 

He said Jefferies’ failure to abstain from the vote last summer had put it in breach of City regulations, in particular the Financial Conduct Authority’s principle 8 which states, ‘a firm must manage conflicts of interest fairly, both between itself and its customers and between a customer and another client.’

‘Today, the Jefferies Group should be in no doubt as to the strength of feeling amongst its professional clients with regard to these potential conflicts of interest and the impact of the changes to the investment policy which were brought into effect at the AGM.

‘Our clients feel strongly that the Jefferies Group should review its position and carefully consider whether it would be in the best interest of its professional clients to abstain from voting on resolutions at the forthcoming EGM,’ he added in an open letter.

Trian, the investment management firm of Peltz (pictured above), owns shares which carry 28.7% of the votes against the committee’s 43.7%. If Jefferies abstained, the independent shareholders, who also have the support of Aegon Asset Management, would account for 51% of the remaining shares and could achieve their goal of replacing three of the fund’s four directors. 

Excluding Trian’s stake and including two other investors, the rebels believe they now have the backing of 86.1% of independent holders in the Guernsey investment company.

The challenge comes on a day in which Jefferies Financial Group said it would merge its investment banking arm into the parent company and announced the spinoff of Vitesse Energy and Idaho Timber as part of a restructuring to reduce the size of its merchant banking portfolio. Shares in the group have fallen 28% this year, valuing it at $6.5bn, according to Refinitiv data.