Saba, led by hedge fund manager Boaz Weinstein, holds a 29% stake in Baillie Gifford US Growth Trust and a 30% stake in Edinburgh Worldwide Investment Trust (EWIT). Consequently, the firm has sufficient voting power to halt the combination of the two portfolios.

The boards of both trusts had championed the merger as a “transformational opportunity” that would lower costs through economies of scale and offer a cash exit for up to 40% of shares. The combined entity was intended to continue investing in US-listed and private companies under Baillie Gifford’s management, The Herald reports.

However, Saba rejected the proposal, labelling it a “cosy deal” designed to entrench an “unaccountable manager” rather than benefit shareholders. Mr Weinstein has previously expressed “profound disappointment” with the trusts’ performance and is currently seeking to oust the directors of EWIT.

The trusts’ boards have reacted sharply to the intervention. Baillie Gifford US Growth Trust chair Tom Burnet expressed disappointment that Saba has chosen to “impede other shareholders” by blocking a deal that offered substantial liquidity, while EWIT’s board accused Saba of attempting to gain control of the company without paying a control premium, thereby “trapping” the remaining 70% of shareholders.

EWIT chair Jonathan Simpson-Dent defended the trust’s recent performance, citing a 17.5% Net Asset Value (NAV) return over the last year, significantly outperforming the benchmark.

Despite the impasse, the board of the US Growth Trust stated it wishes to consult shareholders further. Both trusts currently list Elon Musk’s SpaceX as their largest holding.

Baillie Gifford US Growth Trust has total assets of £891.66m, trading at a 10.5% discount to NAV. EWIT reports total assets of £847.15m, trading at a 7.2% discount to NAV.