Saba Capital has stopped publishing the daily portfolio of its UK investment trust ETF, arguing that the transparency allowed other investors to copy its trades and made it more expensive to build positions.
The Saba Capital Investment Trusts UCITS ETF (UKIT) has moved to a semi-transparent structure and will now disclose its full holdings quarterly, with a one-month delay. Previously, investors could see the entire portfolio each day without a lag.
Authorised participants will continue to receive daily portfolio information so that they can price and trade the ETF, but will receive the data under non-disclosure agreements.
A person familiar with Saba’s thinking told ETF Stream that some of the investment trusts targeted by UKIT are relatively illiquid, meaning it can take the manager a month or two to establish a meaningful position. Publishing purchases as they were made allowed other investors to identify new targets and potentially buy ahead of Saba, increasing the price it had to pay.
UKIT launched in March through HANetf and is managed by Saba founder Boaz Weinstein and portfolio manager Paul Kazarian. The actively managed ETF seeks to profit from investment trusts trading at discounts to net asset value and can engage with boards over measures including buybacks, tender offers and restructurings. It charges 1.5% a year and had net assets of £39.4m at 23 September.
Our view
David Batchelor, senior analyst at QuotedData, said: “Daily portfolio disclosure is usually presented as one of the advantages of ETFs, but for some active strategies it can become a disadvantage. UKIT is an obvious example: Saba often needs time to build meaningful stakes in relatively illiquid investment trusts, so showing the market exactly what it is buying risks making those positions more expensive to establish.
“Semi-transparent ETFs are relatively new to Europe, with regulators relaxing their rules only recently. The structure appears particularly well suited to this type of strategy; investors lose the ability to see exactly what the ETF owns from day to day, but Saba gains greater freedom to build positions without advertising its intentions to the market”.
