Make your vote count

Shareholders in investment trusts have important rights, but they may need to be proactive to take advantage. All too often, investors miss out on the opportunity to exercise their rights because of the way they hold their investment trust shares. And that can lead to some disappointing outcomes.

This issue has been thrust into the spotlight this week as activist investor Saba Capital requested emergency general meetings at seven investment trusts, with proposals that could fundamentally change the trusts investment strategy and costs.

Investors can stop the proposals if they wish. That is because investment companies are listed on public stock exchanges and therefore subject to the same regulation and legislation as other types of public companies. In particular, they must be run in the interests of shareholders – and those shareholders must be given a say on crucial issues such as the appointment of directors and executive pay.

Investment trusts hold annual general meetings (AGMs) at which these matters are discussed, with shareholders getting an opportunity to ask questions before they cast their votes. Votes can also be cast remotely, ahead of the AGM, usually online or by post.

Importantly, however, you won’t always find out about AGMs and voting options automatically. Today, most investors hold investment trust shares through online platforms; while these platforms usually provide a way to cast your vote as a shareholder, they don’t necessarily make it obvious when an AGM is coming up.

The Association of Investment Companies (AIC) now publishes details of the procedures at all the leading platforms on its own website here. Or you can check individually with your own platform. In most cases, you will need to contact the platform to find out when your investment trust’s AGM is being held and what the key votes are. You’ll also need to provide instructions on how you want your vote to be cast.

Some platforms are more switched on than others. Interactive Investor, for example, automatically signs new customers up to its voting and information service so that they receive key shareholder materials. Fidelity offers investors an opportunity to opt into a similar service. You need to check the position with your own platform to establish the detail.

The AIC has written to all major platforms and asked them to ensure shareholders are informed about upcoming votes at the seven investment trusts targeted by Saba, the activist investor, but you can find details here just in case.

Is it worth the bother? While some investment trust votes are on fairly mundane matters, some votes concern really fundamental issues. In recent months, for example, the activist investor Saba Capital Management has built up sizeable stakes in seven investment trusts – in each case, it has asked for an EGM to be held; most of these meetings are due to take place in the coming weeks. The AIC has listed details here.

Saba is pushing for some dramatic changes at these funds, including the appointment of new directors and investment managers. Shareholders will be asked to give their views on its demands.

Taking part in such votes is particularly important. If Saba gets its way, these funds will look very different in a few months’ time – they may pursue new investment strategies or return cash to investors, for example. That may or may not be what you want, but unless you vote on the resolutions, you won’t have a say in whether the changes go ahead. In which case, you may unwittingly end up with an investment holding in your portfolio that is not at all what you chose in the first place.

Ultimately, the fact that investment trusts are public companies with key rights and protections for shareholders is important. You have an opportunity to influence the way the trust is run. Institutional investors that own large stakes in funds naturally hold more power, but when enough retail investors take part at AGMs and EGMs, they can make a real difference. For questions that you should ask yourself about the Saba proposals, take a look here.