Saba Capital has disclosed a new 5% stake in Neuberger Private Equity Partners (NBPE), increasing pressure on the £560m investment company to narrow its 28% share price discount.
The filing to the London Stock Exchange on Friday is the first time the activist hedge fund has formally stated its position, although its £38.7m Saba Capital Investment Trusts UCITS ETF had previously listed NBPE as a holding.
Shares in the closed-end fund, which co-invests in unquoted companies alongside funds picked by New York-based Neuberger, rose 0.5% from £14.96 to £15.04 after the announcement, 27.8% below their net asset value (NAV) per share of $28.13 (£20.75) at 31 August.
As is usually the case with Saba, most of its 5.06% position, 3.3%, is through derivatives, or total return swaps, with nearly 1.8% in shares.
Confirmation of Saba’s interest comes after the former NB Private Equity doubled its share buyback programme to $240m (£178m) in June. At the time, NBPE said it had bought back $88m of shares since allocating $120m (£89m) to a three-year programme of buy backs in February last year.
While its discount remains wide, NBPE’s rating has improved since 2022 when the shares traded 39% below NAV. The narrowing since then has helped shareholders to a 20% total return over five years that is ahead of the 12% total portfolio return.
The position extends Saba’s interest in the private equity sector where it also holds 11% in HarbourVest Global Private Equity (HVPE) and 5.5% in Pantheon International (PIN). HVPE announced plans in April for a $400m tender offer to secure support for its first continuation vote in July. In May PIN sold $300m of fund investments to boost its pace of buybacks. Their shares also stand on 28% discounts.
In a separate filing, Saba also revealed it had doubled its stake in RTW Biotech Opportunities (RTW), a £270m investment trust standing on a 23% discount. The shares have rallied 51% in the past year but the company disclosed a hit in half-year results last month that included an 86% write down in drug developer Ensoma.
The updates comes as Saba, founded by Boaz Weinstein (pictured above), seeks to remove the board of Baillie Gifford US Growth (USA) at its annual general meeting on 23 October, having successfully seen its nominees take control of Baillie Gifford run Edinburgh Worldwide (EWI) and Impax Environmental Markets (IEM) earlier this year. The board of USA has urged shareholders to rally to its cause for a third time to prevent Saba’s nominees taking control and passing the mandate to the firm, a move that would threaten USA’s strong share price recovery in the past three years.
Our view
Matthew Read, senior analyst at QuotedData, said: “While Saba Capital’s emergence on NB Private Equity’s share register is unlikely to be welcomed by the board and its fellow shareholders, it will likely concentrate minds. NBPE has already been taking increasingly aggressive action to address its discount, committing substantial sums to buybacks, but its shares continue to trade well below NAV. We have long highlighted the value on offer in the listed private equity sector and there is an obvious attraction for an activist in buying exposure to a portfolio of established private businesses at a steep discount to their reported valuations. The question is whether Saba will be content to benefit from the board’s efforts to narrow the discount or intends to press for a more radical solution as it has elsewhere. We have been cautioning for some time that turning funds with illiquid underlying holdings into forced sellers, just to benefit from a few percentage points narrowing of the discount, can lead to serious erosion of value. Given that NBPE has been generating meaningful realisations and recycling capital into new opportunities, we think there remains a credible case for allowing the existing strategy to run its course.”
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