One of the City’s most celebrated stock pickers will go head-to-head with a Wall Street activist today in a row over the future of London’s historic investment trust industry.
Katie Potts has led Herald Investment Trust since its inception 30 years ago and has been hailed for backing a host of successful British firms in their infancy.
But she is now up against New York financier Boaz Weinstein who through his hedge fund Saba Capital is trying to seize control of seven London-listed investment trusts – including Herald – by ousting their entire boards and appointing his own allies.
The meeting to determine the future of Herald takes place in the capital at noon today with Saba requiring the backing of at least 50 per cent of voting shareholders to succeed. The remaining six trusts will face their own votes in the coming days and weeks.
Today’s meeting will be seen as crucial for what is in store for the industry – with insiders hoping enough private shareholders come out to vote to defeat Saba.
Potts, 65, founded Herald Investment Management in 1994 and remains its managing director to this day.
Under attack: Katie Potts (pictured) has led Herald Investment Trust since its inception 30 years ago and has been hailed for her backing of a host of successful British firms
A graduate of Oxford University, she originally worked at engineering giant GKN before moving to the City in the 1980s amid the ‘Big Bang’ sparked by the Thatcher government’s deregulation of financial markets.
Potts originally worked at asset manager Barings before becoming a research analyst at investment bank SG Warburg, now part of Swiss group UBS.
She left the bank to set up Herald Investment Management. The trust’s main focus is on small and medium-sized tech and communications firms both in the UK and the US, with Potts aiming to back companies that have the potential to grow rather than more established names which have much higher valuations.
As a result, the Herald portfolio counts firms such as California-based data centre firm Supermicro, Dutch computer chip maker BE Semiconductor and polling company YouGov among its largest holdings.
Other UK firms backed by the trust include marketing group Next 15, engineering outfit Diploma and customer review website Trustpilot.
Over the three decades of its existence, Herald has boosted Potts’s reputation as one of the City’s premier stock pickers.
Since 1994, the investment trust has provided a return of around 2355 per cent, meaning a person who invested £1,000 in Herald back then would have £24,550 today.
By contrast, investing in a tracker for the FTSE 100 index would have produced a 154 per cent return over the same period.
One of Potts’s most successful bets was Cambridge computer chip maker Arm, which Herald backed when it was a small company.
The firm grew into one of the most important tech companies in the world, with its chip designs used by the likes of Apple, Google and Nvidia. Arm trades on the US stock market at a value of £128billion.
Attack: New York financier Boaz Weinstein is trying to seize control of seven London-listed investment trusts through his hedge fund Saba Capital
She now finds herself up against Wall Street raider and poker player Weinstein, 52, who through his hedge fund Saba is hoping to seize control of Herald alongside six other investment trusts.
The chess whizz – who has faced the game’s world number one Magnus Carlsen – is known for taking risks.
Weinstein has been scathing of Potts’s recent stewardship of the trust, singling her out for criticism among the several fund managers on his hit list.
Last week, the Wall Street investor dubbed Herald’s performance ‘appalling,’ accusing Potts of doing ‘little to nothing’ to stem a ‘torrent’ of fund outflows from the trust in recent years.
He did, however, acknowledge that Potts has made ‘very good’ returns over certain periods since the trust’s inception in 1994.
Raised in New York City’s affluent Upper West Side, the financier originally worked at wealth manager Merrill Lynch before moving to investment bank Donaldson, Lufkin & Jenrette and then to Deutsche Bank in 1998.
It was at the German outfit that Weinstein would begin to make his mark. He profited from a series of major economic shocks including the massive fraud and subsequent collapse of US energy group Enron in 2001.
He became one of Deutsche Bank’s youngest managing directors when he was promoted in 2001 at the age of 27.
In 2009, he left the bank with 15 other team members to form his current outfit Saba Capital.
Saba is Yiddish for ‘grandfather’, a tribute to Weinstein’s grandfather who survived the Warsaw ghetto and rescued other Jews from the Nazis during the Second World War.
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