Wide discounts and a hands-off regulator have left Britain’s investment trust sector exposed. Hedge funds following Saba Capital’s model could make the most of it.
A battle for control is unfolding at Edinburgh Worldwide Investment Trust that may prove to be a defining moment for the UK investment trust sector. Activist hedge fund Saba Capital, led by Boaz Weinstein, is attempting to replace the trust’s entire board in a move that signals a more aggressive form of hedge fund activism, shifting from value extraction to governance control.
The conflict is rooted in a straightforward arbitrage strategy. Investment trusts, due to their closed-end structure, can trade at a significant discount to their net asset value (NAV). Hedge funds such as Saba accumulate shares at a discount and apply governance pressure — often through board challenges – to force action, such as buybacks or tender offers, that narrows the gap to NAV.
This opportunity has grown sharply in recent years. Emma Bird, head of investment trust research at Winterflood Securities, notes that “the investment trust sector average discount widened from -2% at the end of 2021 to an average discount of -14% as of 23 March 2026.”
Saba’s approach, however, appears to go beyond traditional arbitrage. The central question for the market is whether the firm is focused on closing discounts or gaining control of assets.
The response from EWIT has been forceful. The trust, led by Jonathan Simpson-Dent, publicly criticised the Financial Conduct Authority for what it described as a “hands-off” stance towards Saba’s tactics. In response, Simon Wallis, the FCA’s director, characterised the episode as the “rough and tumble” of activist investors.
The regulator’s decision not to intervene has introduced an unusual dynamic, raising questions about whether governance battles in the UK are becoming more market-driven than regulation-driven. EWIT has fought off two previous attempts by Saba to take control of the board and has pushed for greater regulatory scrutiny of its requisition attempts, but the FCA has signalled it will not step in.
The trust’s March 2026 tender offer reflects the pressure it is under. Shareholders were given a simple choice: crystallise value at an improved price, or remain invested amid ongoing uncertainty. The board strongly encouraged shareholders to accept, underscoring the extent to which sustained activist pressure shapes outcomes.
Kyle Caldwell, funds and investment education editor at Interactive Investor, frames the stakes clearly. “Investment trusts need to demonstrate they have some sort of edge versus investors simply owning the market through a low-cost index fund or ETF.” He views the Saba-EWIT episode not as a one-off but as an existential test for the sector.
Deeper uncertainty remains around Saba’s intentions should it gain full control. “In the case of Saba, it is unclear whether the US hedge fund’s motivation is truly to drive returns by exploiting discount opportunities,” says Bird. “Many are questioning whether their goal is instead to gain control of the funds’ assets. The repetitive requisition proposals put forward have also increased uncertainty around their long-term outlook.”
Charles Cade, chair of the board at Vietnam Enterprise Limited, is more direct. “The key difference with Saba is that it is attempting to take control of assets rather than simply benefit from discount narrowing.”
The distinction is critical. Traditional activism seeks to unlock value; Saba’s model, its critics argue, may seek to reshape or control the underlying vehicle itself. Activism can act as a catalyst for change by narrowing discounts and providing exit opportunities at an improved price. But a shift in direction could fundamentally alter the landscape of an investment. As Caldwell notes: “In the event of wholesale changes being implemented, this may not be viewed favourably as it is no longer the same proposition as it was when first purchased.”
Meanwhile, ahead of the 8 April deadline for voting on the company’s proposed tender offer, independent voting advisors have recommended the shareholders for EWIT’S proposed Tender Offer.
The tension between short-term value creation and long-term investment stability will define how retail investors respond, and what happens at EWIT is unlikely to remain an isolated case. Wide discounts and elevated interest rates have damaged long-duration strategies and left much of the UK investment trust sector exposed, creating a compelling setup for hedge funds: downside protected by asset value, upside driven by value creation.
If the FCA maintains its stance, the sector may be entering a new phase. One where control contests are settled less by regulation and more by shareholder power.
Saba Capital had not responded to a request for comment at the time of publication.
