Cristian Angeloni, Investment Week, 14 February 2025:
US activist investor Saba Capital is nowhere near done with the world of investment trusts..
In the latest turn of events in the ‘Saba saga’, the US hedge fund revealed on Monday (10 February) it would requisition general meetings at four investment trusts – two of the original Saba seven (CQS Natural Resources Growth & Income and European Smaller Companies) and two new targets (Schroder UK Mid Cap fund and Middlefield Canadian Income).
This time though, it is seeking to turn the trusts into open-ended funds..
Fundamentally, however, the core points driving Saba’s quasi-aggressive activism have some merit, in my opinion.
The investment trust sector has been in need of a shake-up for quite some time now, with engagement historically focused on institutional investors, while their retail counterparts were left out of conversations altogether; and boards looking ever so alike, with several non-executive directors (NEDs) sitting on a plethora of boards – some hitting double digits..
Despite all this, Saba’s activism seems to have missed the point on several different instances, as far as I’m concerned.
The criticism surrounding discount management – which has always been the case but picked up in recent years – cannot and should not only rely on boards.
As QuotedData’s head of investment trust research, James Carthew, rightly pointed out, widening discounts have been the result of issues far outside a trust board’s control.
From cost disclosure to a waning UK stock market, wealth management consolidation to the Magnificent Seven phenomenon, alongside peak inflation and interest rates not seen in a generation, NEDs can hardly be criticised for wider macroeconomics.
But they should be assessed for the way they have responded to such external factors..
QuotedData’s Carthew doubled down on this point, noting that even though boards may have used every tool in the box available to them, “these are not quick fixes”.
“Saba is taking advantage of a situation, ineptly, indiscriminately, and ultimately unhelpfully,” he said.
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