US activist investor Saba Capital Management may have lost the first battle in it bid to overhaul Britain’s £269bn ($333bn) investment trust sector, but the war is far from over with five more trusts set to face shareholder votes over control of their boards this week, according to a report by Reuters.
Saba, led by Boaz Weinstein, is attempting to take control of seven investment trusts where it holds significant stakes, accusing the 160-year-old sector of widespread underperformance — claims the trusts firmly reject.
Last week, shareholders of Herald Investment Trust, the largest of the seven, overwhelmingly voted against Saba’s attempt to oust its board, with Baillie Gifford US Growth Trust and Keystone Positive Change Investment Trust holding their own votes on Monday, followed by three more trusts on Tuesday and Wednesday.
“Boards and managers must take note — any trust with a liquid portfolio trading at a wide discount without a control mechanism is vulnerable,” said Daniel Lockyer, Senior Fund Manager at Hawksmoor Investment Management.
Investment trusts allow individual investors to buy shares in a portfolio of assets, ranging from listed stocks to private companies. Ideally, their share prices should reflect the net asset value (NAV) of their holdings, but market sentiment can push trust shares far below NAV, locking in significant discounts and making it harder for investors to exit without losing value.
Regardless of whether Saba’s campaign succeeds, industry experts believe it has already sent a clear message.
“Saba’s campaign has set a powerful precedent,” said Sonia Falconieri, Professor of Finance at London’s Bayes Business School. “Performance and governance will remain under intense scrutiny.”
A Reuters analysis of the targeted trusts’ most recent accounts — filed between April and November 2023 — found a combined £350m shortfall between their share prices at the time and their collective £3.9bn in book assets. While a snapshot in time, the data highlights persistent discounts across the sector.
Weinstein is proposing a radical fix: merging underperforming trusts, launching aggressive share buybacks, and shifting investments towards private assets rather than large listed stocks.
The sector, however, insists it is already taking steps to address discounts. Trusts argue they have delivered solid long-term performance, saw improvements in 2024, and believe Weinstein’s campaign is primarily self-serving.
