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Boaz Weinstein criticized the “jingoism” of the British financial press and City figures earlier this week as he launched an unusual but high-profile charm offensive.
The chief executive of hedge fund Saba Capital was hoping to win over seven different groups of investment trust shareholders ahead of a series of crucial votes that will ultimately define the future of Britain’s 150-plus-year-old sector.
Saba’s explosive intervention in December, although months in the making, has sparked an outcry in the investment trust industry after boards and management were caught off guard and suddenly found themselves fighting for their positions. job.
Commentators have described Weinstein as “an American who takes pounds and brings them back to the US,” he told the audience of one of the strangest webinars I’ve ever attended, on Tuesday, while discussing the background of his opponents in mutual funds and conduct.
Both sides could be forgiven for being a bit melodramatic, the stakes are high.
The city’s criticism of Saba paints a picture of an existential crisis facing the investment trust sector after several years struggling with irregular performance and discounts on the value of net assets that in October 2023 widened to levels not seen since the 2008 collapse.
Because investment trusts are what is known as closed-end, with a limited number of shares traded on the stock exchange, the price of their shares can fall at a discount to the sum of what they own, also known as their net asset value. .
Charm offensive: Boaz Weinstein outlined his strategy as Saba prepares for seven crucial votes
Saba claims he is a “white knight” coming to rescue beleaguered small investors in investment funds. Unsurprisingly, the managers and boards that run the trusts disagree.
Ali Dibadj, chief executive of Janus Henderson, which manages two of Saba’s target trusts, warned an audience of professional investors this week that a “negligibly small” and “very aggressive” hedge fund was “betting on complacency” to achieve asset hoarding.
This complacency could be a useful weapon for Saba. Peel Hunt figures show an abysmal turnout in shareholder voting, with an average of just 35 per cent of votes cast in the UK market, suggesting that Saba’s gigantic stakes in each trust may be enough to guarantee your wishes.

The date on which Saba’s proposals will be put to a vote by the shareholders of each investment company
But the criticism of Saba has not been without foundation.
Saba accepts that its fees are higher, and it seems obvious to most that its bold acquisition plans are motivated by self-interest rather than some grand altruistic crusade to boost the UK market; After all, it is a hedge fund.
He also appears to lack the Warren Buffett track record needed to justify his accusations of being much better positioned to generate returns that alleged widespread incompetence on the part of boards and management.
Governance may prove to be the most important red flag. Saba’s plan to replace entire boards with one of its employees and just one nominee related to the hedge fund is sure to draw the attention of the Financial Conduct Authority.
Investec analysts say Saba’s proposals show “a clear lack of understanding, bordering on disregard” for the sector’s corporate governance code, and could easily breach stock market listing rules and even diversity and e-commerce targets. inclusion of the FCA.
Board members I have spoken to expressed disbelief at the way Saba has behaved both publicly and privately.
But perhaps investors are not the only ones to blame for complacency.
Fund bosses have pointed to regulatory pressures, fewer analysts covering the sector and higher bond yields as factors driving their recent problems.
Meanwhile, critics suggest that boards and management have been slow to readjust to a world of non-zero interest rates and should be more proactive in addressing discounts when they occur.
Saba’s plan is not so radical
Fear not, Weinstein tells us, Saba is the “white knight” of the UK market, here to save us from incompetence and poor performance. It will bring these trusts together and create a vehicle to buy other undervalued trusts.
But in some respects, there is nothing particularly novel about Saba’s approach.
‘Trusted trust’ vehicles have been around for some time; Take, for example, Peter Hewitt’s CT Global Managed Portfolio Trust.
Its shares are down about 7 percent over the past three years, reflecting the problems facing the broader market. The consortium, although managing less power than Saba can offer, has never claimed to be the savior of the UK market.
Likewise, buying trusts at a low price because you believe a deep discount will be reduced is not a revolutionary strategy.
Saba insists that it will simply encourage the trusts in which it buys stakes to engage in “shareholder-friendly” activities, such as share buybacks to reduce discounts, thereby benefiting not only themselves but all investors in the company’s investment trusts. UK – thanks Boaz!
This is now an activist market.
Some investment funds have already been using buybacks in their efforts to fight discounts for the past three years, with mixed results.
Saba points to the ‘£3.9 billion’ it plans to invest in UK assets after merging the funds, apparently a much-needed piece of firepower to reinvigorate the discount-laden funds.
But that figure depends on the hedge fund getting its way with seven separate shareholder votes, investors staying invested and not losing value as holdings are sold outside the UK.
In that case, Saba may not even merge the seven trusts, it has not decided yet. Weinstein assures us that this decision is being diligently reflected upon.
What will happen next with investment trusts?
Decisions made by Saba, shareholders and regulators will be closely watched in the coming weeks, but change is now inevitable for the investment trust sector.
Saba has stakes in a total of 24 London-listed trusts and no doubt intends to stir elsewhere later; The upcoming votes, scheduled for Jan. 22 to Feb. 5, likely won’t be the last.
Investment trust boards will have to respond, whether they have been attacked by Saba or not, as the rules of the game have changed. This is now an activist market.
This may be easier said than done, but they will have to find a way to be more active in closing discounts and driving returns for shareholders.
In this environment, other major players will have to enter the market, potentially with their own ideas for the future of the sector.
Who knows, maybe we humble DIY investors will become less complacent and start accepting our small role as “asset owners.”
Regulators, in turn, may have to reevaluate the regulation.
Whether all of this will ultimately benefit the UK market and its investors remains to be seen, but changes are coming.
The Rubicon has been crossed, the die is cast and the world – at least for investment funds – can never be the same again.
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