Saba Capital Management, a New York-based hedge fund led by activist investor Boaz Weinstein, is intensifying its push to take over seven U.K. investment trusts. Saba aims to replace the current boards of directors, claiming they have failed to address the funds’ trading discounts to net asset value (NAV), which have negatively impacted shareholder returns.
The targeted trusts include:
- Baillie Gifford U.S. Growth
- CQS Natural Resources Growth & Income
- Edinburgh Worldwide Investment
- European Smaller Companies
- Henderson Opportunities
- Herald Investment
- Keystone Positive Change
Saba’s Proposal
In an open letter to shareholders, Saba urged them to vote for a board overhaul at general meetings scheduled for early 2024. The hedge fund, with stakes ranging from 19% to 29% in these trusts and a total investment of £1.5 billion ($1.9 billion), is the largest investor in each. Saba is nominating two of its own team members to each board and proposes shifting the trusts’ mandates to focus on acquiring other discounted trusts.
The firm criticizes the current boards for failing to hold investment managers accountable, resulting in underperformance and deepened trading discounts. Saba emphasizes that its preference for private negotiations has been overridden by persistent mismanagement, forcing it to adopt a public stance.
Activist Strategy
Saba’s move mirrors its approach in the U.S., where it has successfully targeted closed-end funds trading at substantial discounts. The firm pressures managers to narrow the gap between NAV and market price, benefiting investors.
About Saba and Weinstein
Founded in 2009 as a spinoff from Deutsche Bank’s proprietary trading group, Saba Capital currently manages $5.5 billion in assets from offices in New York and London. Weinstein gained notoriety for his profitable bet against JPMorgan Chase’s infamous “London Whale” trade in 2012, which resulted in a $6 billion loss for the bank.
Saba’s campaign could mark a turning point for the U.K. investment trust industry, potentially signaling a shift towards greater accountability and transparency in fund management. Shareholders now face a critical decision on the future direction of these trusts.
