Corporate Governance Failures in UK Investment Trusts: A Case Study of EWI-SpaceX and Systemic Risks

The recent controversy surrounding the Edinburgh Worldwide Investment Trust (EWI) and its abrupt sell-down of a 35% stake in SpaceX in October 2025 has ignited a broader debate about corporate governance failures in UK investment trusts. This case, coupled with systemic underperformance and opaque decision-making in other trusts, underscores the urgent need for investor scrutiny and structural reforms.

The EWI-SpaceX Sell-Down: A Governance Crisis

According to a Bloomberg report, Saba Capital Management, EWI's largest shareholder, has raised alarms over the timing and execution of the SpaceX sell-down. The sale occurred just two months before a scheduled revaluation of the asset, with Saba arguing that the price was significantly below SpaceX's subsequent $800 billion valuation. This raises questions about whether the board acted in shareholders' best interests or prioritized facilitating a proposed merger with Baillie Gifford's USA trust.

The merger, if approved, would consolidate EWI and USA under Baillie Gifford's management, potentially allowing the firm to retain control while offering Saba a standstill agreement to curb future activism. Critics highlight that the sell-down may have been strategically timed to meet UK investment trust tax requirements by diluting the combined portfolio's exposure to SpaceX. EWI's board has been accused of failing to disclose the sell-down promptly, exacerbating concerns about transparency and potential conflicts of interest.

Systemic Governance Failures in UK Investment Trusts

The EWI case is not an isolated incident. UK investment trusts have faced widespread governance challenges, with many trading at substantial discounts to their net asset value (NAV). For instance, Premier Miton Global Renewables Trust (PMGR) saw its NAV drop 6.56% in August 2025, trading at a 3.36% discount. Similarly, the NB Distressed Debt New Global Trust (NBDG) experienced a 5.58% NAV decline and a 28.53% discount, reflecting a disconnect between asset value and market perception.

These trusts exemplify broader issues, including opaque decision-making and conflicts of interest. PMGR's board, for example, faced criticism for its lack of clarity during its voluntary liquidation process in December 2025, with shareholders left uncertain about rollover options and cash exits. Meanwhile, NBDG's governance failures were compounded by declining NAVs and a challenging macroeconomic environment, leading to its liquidation in late 2025.

Regulatory and Academic Insights

The UK government's 2025 regulatory reforms for Alternative Investment Fund Managers (AIFMs) aim to reduce compliance burdens but have been criticized for potentially exacerbating governance gaps. Academics, including the UK Sustainable Investment and Finance Association (UKSIF), emphasize the need for systemic risk assessments, particularly in addressing climate change and geopolitical instability. These studies argue that traditional risk models often overlook cross-sectoral threats, urging investors to adopt forward-looking governance frameworks.

Activist campaigns, such as Saba's simultaneous efforts against seven UK trusts, have further highlighted vulnerabilities in the sector. While these campaigns have spurred some trusts to reduce NAV discounts, they also reveal a lack of board accountability and shareholder engagement.

Recommendations for Investors

Investors must prioritize due diligence on underperforming trusts with opaque governance structures. Key actions include:1. Demand Transparency: Shareholders should insist on detailed disclosures about asset valuations, board decisions, and merger timelines.2. Advocate for Independent Oversight: Replacing conflicted directors with independent nominees can mitigate self-interest and enhance accountability.3. Monitor Regulatory Developments: Stay informed about AIFM reforms and their potential impact on governance standards.4. Support ESG Integration: Align investment strategies with long-term sustainability goals to address systemic risks.

The EWI-SpaceX controversy and broader trust failures serve as cautionary tales. Without robust governance, even high-profile investments like SpaceX cannot shield trusts from reputational and financial damage. Investors must act decisively to demand transparency and structural reforms, ensuring that board accountability becomes a cornerstone of UK investment trust management.