Busy activist hedge fund Saba Capital has expanded its investment company interests with a new 5% holding in RTW Biotech Opportunities (RTW).
A stock exchange filing this afternoon shows the New York-based firm owns 2.3% of the £587m investment company through shares with the remaining 2.7% in derivatives, or total return swaps.
This makes RTW the latest addition to a long list of investment company stakes Saba has established since changing strategy after its founder Boaz Weinstein’s attempt to oust the boards of seven London-listed funds failed spectacularly at the start of this year.
RTW marks a further involvement in biotech and healthcare funds following its purchase of a 5% stake in Worldwide Healthcare (WWH) in May.
Its other latest trades have seen it lift its position in Life Science REIT (LABS) from 5.9% to 10% in a bet that the specialist real estate fund’s decision to wind down will see its shares start to close the 44% gulf between their price and the underlying value of its properties.
In Smithson (SSON), its most high profile target, Saba now owns 16% of the £1.6bn global mid cap fund overseen by under-pressure star fund manager Terry Smith. We were the first to report Saba taking a 14% position in September.
We also reported this month the new 6% holding Saba disclosed in Premier Miton’s Diverse Income (DIVI) as the £247m UK equity income trust seeks to rebuild its following after two years of big redemptions.
It has also added to its position in Impax Environmental Markets (IEM) to 12% from 11%.
RTW reawakens
Saba’s emergence on the RTW register comes after a dramatic re-rating in the listed fund’s shares which stand on a comparatively narrow 15% discount after rallying 47% in the past six months.
Back in April, when markets were starting to recover from the shock of US tariffs, RTW dollar shares trailed as much as 35% below the net asset value (NAV) of their investments in drug developers, both on and off the stock market.
It’s quite possible that Saba invested around then and its holding has increased as the company has continued to purchase its cheap shares, possibly encouraged by the hedge fund. RTW expanded its $30m buyback programme by a further $15m last month.
Like rivals Biotech Growth (BIOG) and International Biotechnology Growth (IBT), RTW has been boosted by growing investor confidence after the sector pulled through a three-year bear market.
Sentiment has improved as the Trump administration has signalled its willingness to reach a settlement with pharmaceutical companies over drug prices and tariffs. A string of acquisitions by drugs giants snapping up smaller firms to fill gaps in their pipelines has been particularly helpful to RTW which has benefited from bids to four portfolio companies since June.
Launched in 2019 at $1, RTW shares advanced to a peak of $2.41 in February 2021 before sliding to a low of 98 cents in July 2022 as inflation and interest rates rose, deterring investors from speculative “jam tomorrow” companies. This year’s rally has seen them rise to $1.81, a vindication to RTW chief investment officer Rod Wong’s decision to lift his personal stake to 15%, now worth £88m.
