Linus Uhlig, Investment Week, 13 January 2025:
“This is what Saba does. This is out of the playbook in the US, so it should come as no surprise,” said Baillie Gifford’s director of marketing and distribution, James Budden, speaking as a storm of US hedge fund investor activism has rocked the investment trust sector..
Should Saba be successful in the upcoming votes, the firm’s partner and portfolio manager, Paul Kazarian, would be installed as one of two new directors on every trust’s board, other than USA.
Kazarian would be joined by a plethora of other individuals as the second director in each of the six trusts, with candidates ranging from former Goldman Sachs and Barclays employees to other private equity and investment heavyweights..
One source familiar with the matter mentioned that activists will typically undertake significant due diligence before investing in a closed-ended strategy, and these hedge funds must fundamentally like the underlying assets in the portfolio.
They explained that there is typically collaboration between the activist hedge fund and the board to narrow the discount because many of these hedge funds think that trusts should not trade at a discount.
According to these sources and QuotedData’s Carthew, this where Saba’s strategy varies.
“It is different. What Elliott wanted to do was create a situation where you get liquidity at a narrow discount, but it was not trying to force an agenda on the board,” said Carthew.
“If you think about the Herald portfolio, or even, European Smaller Companies, you cannot liquidate those portfolios at NAV in a hurry, it just cannot happen. And if everyone knows you are a seller, it is going to be quite hard work. It is going to take time, and it is probably going to destroy value,” he said.
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