Desiree Sainthrope stands at the intersection of traditional corporate governance and the high-stakes world of global compliance. With a career defined by deconstructing complex trade agreements and navigating the shifting sands of intellectual property, she has become a primary voice for those seeking to modernize our legal frameworks. Today, we sit down with her to discuss the intensifying friction within the UK investment trust sector, where high-performing entities like Baillie Gifford US Growth are finding themselves in the crosshairs of activist investors despite delivering returns that significantly outpace global benchmarks. This conversation explores the structural vulnerabilities of the Companies Act 2006, the “fuzzy” definition of director independence, and the growing risk of shareholder apathy in an era of perpetual meeting requisitions.
When an investment trust significantly outperforms benchmarks like the S&P 500, yielding a 44.5% share price return, yet still faces a relentless requisition to overhaul its board, what does this tell us about the current state of shareholder activism?
It reveals a profound and perhaps unsettling shift where stellar performance is no longer an absolute shield against structural challenges. In the case of Baillie Gifford US Growth, the trust delivered a net asset value return of 31% during the financial year to May 2026—comfortably ahead of the S&P 500’s 29.8%—and yet the board found themselves fighting for their professional lives at the offices of Stephenson Harwood. This suggests that activists aren’t just looking at the bottom line; they are exploiting the mechanics of the trust itself, identifying perceived vulnerabilities in how the board is composed or how the manager operates. It feels like a high-stakes chess match where the traditional metrics of success are being sidelined by aggressive tactical maneuvers that can leave a board feeling incredibly defensive. When you have a firm that has delivered such strong results but still faces a vote to appoint three Saba-nominated directors, it signals that the era of “quiet success” is officially over for investment boards.
The regulatory framework governing these trusts is often described as being stuck in a “Victorian era.” How do these outdated rules allow for repeated requisitions, and what is the real-world impact on the company’s focus?
Our legal architecture is fundamentally built on the assumption that calling a meeting or gathering support is a physically difficult, time-consuming task that required hand-delivered notices and slow-moving correspondence. Today, in our digital reality, that assumption has collapsed, yet the thresholds and percentages remain relics of a bygone age. There is currently no cap or restriction on how often a shareholder can requisition a meeting, provided it isn’t “frivolous,” which is a very high bar to prove in a court of law. This allows an activist with a large minority stake to essentially ask the same question over and over until they get the answer they want, essentially “rattling” the trust until the opposition tires. For the board, this creates a state of perpetual siege, where they are spending more time drafting circulars and pleading with retail investors to turn out than they are focusing on the 31% NAV growth that made them successful in the first place.
In the battle for control over these trusts, there has been significant debate over the “independence” of nominee directors. How do activists navigate the current gaps in UK law to position their own candidates?
Independence in UK law is currently more of a “know-it-when-you-see-it” vibe than a strictly codified set of criteria, which creates a massive loophole for savvy activists to exploit. Under current listing rules, a board must have a majority of independent directors, but that independence is defined primarily in relation to the existing investment manager. Because the nominees suggested by an activist like Saba are technically independent of the current manager—the very person they are trying to sack—they fit the criteria perfectly at the moment of appointment. It’s a clever bit of staging and sequencing: they are independent until the moment the activist is appointed as the new manager, at which point the conflict would trigger a resignation, but by then, the strategic shift is already complete. Even with the FCA’s recent consultation attempts to tighten these criteria, the “fuzzy” nature of the concept means a determined party can almost always comply with the letter of the rules while completely defeating their spirit.
Retail investors hold the majority of shares in many of these trusts, yet their participation is often low. What are the systemic barriers preventing them from effectively countering or supporting these activist movements?
The problem is a toxic combination of voter apathy and a fragmented information pipeline that leaves the average person in the dark. If you are a retail investor with a hundred or a thousand shares, the incentive to read through 15 different dense circulars in a single 12-month period is incredibly low; the emotional and mental labor simply doesn’t scale with the size of the holding. Furthermore, the way information is passed—or not passed—through investment platforms is a chaotic mess where some platforms provide voting rights and full disclosure, while others vote on behalf of the user or provide no information at all. This creates a vacuum that activists can easily fill by whipping up support from a concentrated block, while the vast majority of shareholders remain disinterested and unengaged. As we saw with the Edinburgh Worldwide Investment Trust, a low turnout can allow a minority to win a requisition, locking everyone else into a management structure they never actually wanted.
Activists are often criticized regardless of whether they present a clear plan or simply call for the removal of a board. Can you elaborate on this “Catch-22” and how it influences the narrative during a requisition?
It is a classic tactical trap where the activist is essentially damned if they do and damned if they don’t. If an activist comes forward with a highly detailed replacement plan, the incumbent board will tear it apart, pointing out every potential flaw or risk to the 44.5% returns they’ve already achieved. However, if the activist simply points out failures and demands a change without a plan, the board labels them as reckless and self-interested, arguing that they are tearing down a house without knowing how to build a new one. This creates a strident, defensive atmosphere where both sides are making increasingly polarized claims, making it nearly impossible for a disinterested shareholder to judge who is acting in good faith. It often boils down to a battle of “selfish reasons” versus “corporate duty,” and in that fog of war, the structural mechanics of the vote often trump the actual merits of the argument.
You’ve noted that the Companies Act 2006 is now twenty years old and has been “patched” rather than rewritten. What are the dangers of this piecemeal approach to corporate law?
Patching a twenty-year-old law is like trying to fix a leaking ship by just adding more planks; eventually, the structure becomes so heavy and complex that it’s almost impossible to navigate safely. We’ve seen 65 new sections inserted just between two original sections—790 and 791—of the Act, which creates a level of complexity that only the most well-resourced institutional investors can truly understand. This complexity is itself a barrier to entry for fair governance, as it favors those who can afford to find the loopholes buried within the thousands of words of amendments. Every time the regulator adds a new layer to fix a specific problem, they risk over-regulating the good actors who are already doing their best or under-regulating the ones who have already found a way around the new restriction. We are overdue for a fundamental re-examination that acknowledges we are no longer in 2006, and that digital capital movement requires a much leaner, more responsive framework than what was designed two decades ago.
What is your forecast for the future of investment trust governance?
I anticipate a period of significant attrition where more trusts will follow the path of Middlefield Canadian Income and simply wind up after being exhausted by successive waves of requisitions. If we do not address the “repeat-requisition” dynamic and the ambiguity of director independence, we will see a landscape where only the largest, most defensive trusts survive, while others are picked off by activists who have mastered the art of the structural takeover. The “fuzzy” regulations we rely on today will likely be replaced by much stricter, possibly more rigid, criteria for shareholder-led meetings, but until that happens, expect the current tactics to become the standard operating procedure for anyone looking to disrupt the sector. We are heading toward a showdown between the traditional board-led model and a new, more aggressive form of shareholder-manager hybridity that will fundamentally change how we value these investment vehicles.
