Like buses – you wait around for regulatory changes to go your way, and then three come along at once.

Well, I’m stretching that a bit, because the win on the Pensions Bill was back on 29 April 2026, but then last week the FCA launched a consultation on related party transactions between boards and managers, and then this week it launched its consultation on reforming MiFID cost disclosures.

Pensions Scheme Act 2026

The win on what is now the Pension Schemes Act 2026 means that pension funds can use investment companies as one way of accessing private investments. The worry had been that the government was determined to exclude them and then mandate that pension funds invest a certain percentage of their assets in private investments. In a worse case scenario, existing pension fund investors might have felt obliged to sell their investments. Now, there is reasonable hope that they could be buyers instead.

MiFID cost disclosure

The MiFID cost disclosure consultation should resolve the final bit of the cost disclosure issue that has plagued the sector for years. We already have the pre-sale disclosure element fixed. Now, if this goes ahead as drafted, client-facing firms (such as IFAs and wealth managers) will be required to disclose a single cost figure for their services to clients. Crucially, they will not need to incorporate a look-through cost into any investment company’s charges within that number. This levels the playing field with other forms of investment such as ETFs.

More to do

These reforms are not a panacea. The investment companies industry still has a lot of work to do to raise awareness and understanding of the product. Liquidity is an issue for many potential investors, negative perceptions abound – bad news makes for better headlines, and many potential investors need better financial education. However, we are on the right track.

Blow to Saba

One newish reason that some investors give me when I ask why they do not buy investment companies is Saba. For some, there is a fear that investment theses will not be given time to play out. Instead, an activist will swoop and force a liquidation at the bottom of the investment cycle, or even just as the upswing is getting going. I share that frustration. One of the joys of buying investment companies is that you can buy funds when they are unloved and trading at a discount and then get a double whammy of a recovering NAV and a narrowing discount.

Fortunately, with last week’s consultation, the FCA looks to be choking off the game plan that Saba applied to Edinburgh Worldwide (EWI) and Impax Environmental Markets (IEM), and appears to be trying at Workspace (WKP). It has succeeded in dislodging the directors of EWI and IEM and put its nominees on the board. The next step that we were expecting was that the incumbent managers would be sacked, Saba appointed to replace them, and the investment mandate changed to one of investing in other investment companies at a discount.

At EWI, the new board is yet to say anything on the management contract. It has set out its priorities, which are to:

• deliver an appropriate liquidity opportunity for shareholders;
• maintain strong governance and oversight;
• protect and enhance shareholder value; and
• position the company for long-term success.

The liquidity opportunity will come after the holding in SpaceX (which was 22% of the portfolio on 3 June 2026) has been sold. Because of the unusual way in which the IPO was structured, the timing of that is uncertain – dependent on the timing of earnings releases and how the stock is trading (this Morningstar article has more info) but whatever happens, the last stock should be sold by early December.

There is also a question mark about how much the sale proceeds will be. There was a story on Reuters that almost a third of the free float has been shorted, I guess in anticipation that when the stock does start to free up, there may be some indigestion.

The new EWI board is also making noises about shareholders wanting it to “review portfolio decisions (including historical decisions to divest of [SpaceX]”. That suggests the potential for a dispute with the incumbent manager and an excuse to terminate the contract.

As we reported on 25 June, the new board is recruiting new directors in the UK.

The new IEM board has only been in place since 17 June. Saba has asked it to fire Impax but there is no news on that front yet.

Changes to Listing Rules

The FCA consultation on proposed changes to the UK Listing Rules for closed-ended investment funds seeks to “ensure conflicts of interest are addressed consistently in our rules and shareholders are appropriately protected, including where a significant shareholder is also appointed as an investment manager”.

If the draft rules are adopted, any director who isn’t independent of the proposed manager could not participate in the decision as to whether or not they get the job and the terms of the contract. Another change would mean that directors proposed by a substantial shareholder would not be considered as independent. That might explain why EWI is looking to recruit new directors. There are other suggestions, too, that “an investment manager which then becomes a substantial shareholder (or vice versa) would not be able to vote to influence the outcome of a proposed material change in investment policy”.

These are proposals at this stage, and if supported by the consultation and adopted probably would not be in place until the end of the year. However, as Richard Stone, chief executive of the Association of Investment Companies, said: “We will work with the FCA and industry to analyse the potential impact of these reforms and get them implemented as quickly as possible. In the meantime, we would expect market participants to respect the spirit of these proposals”.

The FCA is unlikely to look kindly on any board that tried to rush through changes ahead of this. That does raise questions about Saba’s efforts to remove WKP’s board – which we discussed here.

This does not mean that investment companies will be immune from activist attacks, but it does close off one avenue.

At the end of May, there was some celebration that the average discount on investment companies was back in single digits. Saba should take some of the credit for that, but it does mean that it has fewer targets. More and more companies seem to be issuing shares – JPMorgan European Growth and Income (JEGI), which we published on today, for example. It feels like the tide is starting to turn in our favour. Thank you to the FCA for doing its bit (finally).