Home Money ‘UK needs this’: Saba boss claims investment trust hit will reinvigorate UK market

‘UK needs this’: Saba boss claims investment trust hit will reinvigorate UK market

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Saba Capital chief executive Boaz Weinstein said the group's intervention will boost the wider UK investment trust market.
  • Hedge fund CEO says UK ‘urgently needs’ Saba as investors shun market

The hedge fund behind a planned acquisition of seven London-listed investment trusts has revealed plans for a new strategy which it says will help revitalize the entire sector.

Saba Capital is trying to reform the boards of seven trusts in which it has acquired significant stakes and establish itself as an investment manager.

The firm’s chief executive, Boaz Weinstein, told investors on Tuesday that if investors back its plans in a series of decisive votes, Saba will merge all or some of the seven funds into a new London-listed vehicle.

The fund would buy shares in other investment trusts at steep discounts to the net asset value.

If the merged vehicle encompassed all seven trusts, it would have an estimated net asset value of £3.9bn, with only 16.5 per cent invested in UK assets at inception.

Saba says his goal will be to increase this proportion to 100 percent of the trust’s portfolio.

Saba Capital chief executive Boaz Weinstein said the group’s intervention will boost the wider UK investment trust market.

Weinstein told investors on Tuesday: “If given the opportunity, (we will launch) this Saba product which I think the UK urgently needs, given that all the (financial) institutions have been sellers (of UK assets).

‘The fund will benefit from scale… (and) we are going to put that money back into the UK. We are the white knight of the UK market. Everyone is a salesman. We are a buyer.

“This is a huge amount of ammunition for us to buy up all the beleaguered funds and help them move up in price.”

Saba also plans to collaborate with investment trusts in which it has stakes through the new vehicle, encouraging them to use “shareholder-friendly” actions such as share buybacks to help reduce discounts further.

Weinstein said the new vehicle would also “help the UK market create new investment funds”, because “when they are not discounted, the manager often offers a secondary offering or introduces a new product”.

Saba has accused the seven respective boards and management of not sufficiently addressing issues related to performance and persistent discounts to net asset value.

He is scheduled to present his proposals to shareholders in a series of votes scheduled from January 22 to February 5.

The trusts’ boards have urged shareholders to reject Saba’s “opportunistic” approach, accusing the hedge fund of self-interest at the expense of other investors.

Directors have also highlighted Saba’s relatively high fund fees, suggesting investors could face similar charges if the hedge fund gets its way, and accused the firm of cherry-picking data in order to distort perceptions of the performance.

Additionally, they point to the fact that performance has improved recently and discounts have been significantly reduced. Saba, for its part, highlights its own investment as the main driver of the lower discounts.

Saba will take its proposals to shareholders in a series of crucial votes

Saba will take its proposals to shareholders in a series of crucial votes

The wider UK investment sector has also weighed in, with analysts from Investec, Frostrow Capital and Evlyn Partners among firms urging investors to back their current boards.

Meanwhile, Peel Hunt analysts have said there are around 17 London-listed investment funds in which Saba has taken stakes that could be vulnerable to a similar turmoil.

Broker Frostrow warned shareholders: “Saba is trying to scam you by taking advantage of an opportunistic moment to get in and you get out.”

Saba, which says it will offer investors substantial liquidity should they want to sell, believes it has already had a positive impact for investors and the UK market.

“My prediction is that, in the next three months, many of the funds that Saba owns will announce shareholder-friendly actions that will net them hundreds of millions of extra pounds that they would not have otherwise earned, because they want to beat us to the punch.

“The entire UK closed-end fund space will generally see smaller discounts, especially if we win and have this dry powder to buy UK funds.”

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