Herald highlights significant long term underperformance from Saba
In a further response to the requisition request issued by Saba, the board of Herald (HRI) has issued a statement highlighting the trust’s superior performance over that of Saba. From publicly available data sources and press articles, the board believes that Herald has materially outperformed Saba Capital Master Fund, often described as its flagship fund, since it was launched in August 2009.
The board believes that the Saba Master Fund, which is currently a shareholder in Herald and each of the other six trusts thatSaba has requisitioned, has delivered an annualised net return of approximately 4.8% from 1 August 2009 to 7 June 2024 (being the latest date to which its performance data is available from public sources), implying a cumulative return of approximately 99.5% (in each case calculated in USD, the Saba Master Fund’s base currency). In direct contrast, Herald’s annualised NAV total return over the same period was 14.1%, or a cumulative return of 611.4% (in each case calculated in GBP, Herald’s base currency).
Furthermore, the board notes that the reported discrete annual returns for the Saba Master Fund raise questions regarding the potential volatility of Saba’s strategy. For the 13 years that annual performance data is available publicly from third party sources and press articles (2010 to 2023 inclusive, with the exception of 2017. Only cumulative or partial data is available for 2009, 2017 and 2024), the Saba Master Fund delivered negative annual performance in six of the 13 years according to such sources. Over the same period, Herald’s discrete annual NAV total return was negative in only three years.
On the basis of the performance set out above the board does not believe that appointing Saba in place of the existing manager would be in the best interests of all shareholders.
Commenting further, the board of HRI also highlights that the majority of Herald’s shareholders are longer-term investors, rather than short-term traders, and thus are aligned with the manager’s investment approach of finding companies that offer long-term growth potential, typically over a five-year horizon or more. Saba has highlighted the company’s investment into Super Micro Computer. The board considers such investment to demonstrate aptly that Herald’s long-term approach can create significant value for shareholders: with a maximum book cost of less than £8m, the company’s investment in Super Micro has made over £100m in realised gains, with further unrealised gains of over £15m, as at 10 January 2025. Herald first invested in Super Micro in January 2018 thanks to the manager’s company research and deep sector knowledge.
Saba’s proposals, which lack any meaningful detail apart from the intention to appoint itself as manager, fundamentally change the company’s investment strategy and offer an uncapped cash exit on uncertain terms, risk significant value destruction for shareholders, and are the antithesis of the company’s successful long-term investment approach.
The board expects that, from what limited information is available, Saba’s proposals to change the company’s investment strategy and offer a cash exit to shareholders would likely require the realisation of a significant proportion of the company’s current portfolio. The current portfolio is mainly composed of smaller quoted technology and communications companies. So far as the board is aware, Saba has no experience managing such a portfolio. The forced realisation of investments, including some positions that by their nature have limited liquidity, could have a significant negative impact on the company’s NAV as a consequence of Saba’s known selling appetite. Thus, Saba’s recently proposed cash exit, which will not occur for “at least a year,” may offer a significantly lower value than today’s NAV.
The board believes that Saba’s proposals are designed for its own economic benefit and will be to the detriment of those shareholders who wish to remain invested in a proven strategy that has delivered a 27x NAV total return since the first day of dealings.
Shareholders are strongly encouraged to vote against each of the requisitioned resolutions to be proposed at the requisitioned general meeting.
[QD comment – James Carthew: These numbers are pretty damning and perhaps explain why Saba was so keen not to include its long term track record in its announcements.]
HRI : Herald highlights significant long term underperformance from Saba