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Reverse Electra

5 November 2015 By Robert Cole

Now Electra’s activist investor has to prove his point. After around 18 months of agitation, Edward Bramson, who runs the Sherborne fund, has won two seats on the board of the 1.3 billion pound investment trust. Bramson has also rattled Electra’s cage hard enough to prompt the resignation of its chairman, Roger Yates.

Bramson’s complaints were twofold. First, he reckoned that Electra’s portfolio companies could be better managed, increasing their value. Second, he questioned the nature of the relationship between the board of Electra, the publicly listed trust, and Electra Partners, the firm employed to oversee day-to-day investment management responsibilities. Bramson argued that sound principles of corporate governance demand that the board of an investment trust and its fund manager operate at arm’s length – a point that a majority of Electra shareholders appear to have agreed with.

In the runup to Thursday’s shareholder vote, Electra’s board published past performance figures that, at face value, suggest Bramson faces a high bar. Over the past three, five and 10 years to Oct. 16, net asset value returns were 56 percent, 88 percent and 236 percent, respectively, according to Electra documents published on Oct. 21. Each one, the firms said, was well ahead of the benchmark private equity index compiled by Morningstar.

Electra shares have also climbed. Although some of the recent gains are attributable to Bramson’s 18-month campaign, he is likely to be judged on gains – or losses – made from this point forward.

Since Bramson has levelled stern criticisms of both the board and the fund manager, his attempts at reform may encounter significant resistance. Yates’ decision to step down suggests the air will be clearer. But Kate Barker, Yates’ interim replacement, was quick to re-endorse the role of Electra Partners. Sherborne’s two board seats, meanwhile, are a minority.

The Nov. 5 shareholder vote was decisive – 53.5 percent to 46.5 percent – but it fell a long way short of being overwhelming. Set Sherborne’s near-30 percent stake on one side and around four-fifths of the remaining shareholders backed the incumbents. Before, Electra’s incumbent board was under pressure. The heat is now very clearly on Sherborne.


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