David Thorpe, FT Adviser, 18 December 2024:
US hedge fund Saba Capital is attempting to remove the boards of seven UK investment trusts, a move which could be positive for advisers’ clients, according to Iain Scouller, analyst at Stifel..
Each of those trusts has suffered performance issues in recent years and traded at wide discounts to net assets until Saba’s shareholding was revealed.
In each case, Saba has requested an extraordinary general meeting (EGM) at which investors would have the opportunity to vote to replace the directors of the trusts and replace them with Saba representatives..
Stifel’s Scouller believes it is positive that Saba’s plan has been revealed and shareholders can now make their decision.
He feels Saba will win at least some of the votes, though he believes the main benefit to clients may be that the boards of the seven trusts involved try to woo investors with changes of their own to improve the performance of the trusts.
Matthew Read, senior analyst at QuotedData is more sceptical.
He told FT Adviser: “The activist investor has been stalking parts of the investment companies’ sector for some time but, despite various boards and managers attempting to engage with it, all of those that we have spoken to have said that Saba was not interested in talking to them.
Read added: “Reading this morning’s statement, we see an obvious flaw in their strategy. Saba wants shareholders to replace the current boards and deliver on its plan to ‘quickly deliver substantial liquidity and long-term returns for all shareholders’.
“However, those two are often mutually incompatible, particularly for some of the funds it is targeting where the underlying holdings are less liquid – Herald being the obvious example as it is a big fund with a huge tail of small illiquid positions that trade by appointment that could take years to sell off and you would likely move the market against you in many of these, particularly once the market spots you as a forced seller.”
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