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Boaz Weinstein, founder and chief investment officer of Saba Capital Management, has taken aim at seven UK investment trusts Photographer: Jeenah Moon/Bloomberg via Getty Images
Boaz Weinstein, founder and chief investment officer of Saba Capital Management, has taken aim at seven UK investment trusts Photographer: Jeenah Moon/Bloomberg via Getty Images

US hedge fund Saba Capital triggered fury and an industry-wide defensive effort when it launched an activist campaign against seven UK investment trusts last month.

The Manhattan-based hedge fund, led by Boaz Weinstein, has laid siege to the trusts, accused them of failing to perform, and pushed for shareholder votes to “elect new directors with a concrete plan to deliver shareholder value”.

Control of the seven trusts now hangs in the balance as investors cast their votes on the proposals in a series of upcoming votes.

Saba’s campaign has sent shockwaves across the often staid and placid world of UK investment trusts. The UK investment industry has mounted a fierce resistance against the plans, with trade bodies like the Association of Investment Companies (AIC) and brokers rallying behind the trusts.

“Saba’s attack on the UK investment companies industry is entirely self-serving,” said James Carthew, head of investment companies at Quoteddata.

“It aims to seize control of these funds to impose its own agenda, book a short-term profit on its investment and then – we suspect – extract management fees from a strategy that investors have shown no appetite for.”

Investec analysts have noted that Saba failed to provide “even basic information on key fundamental issues including their own track record,” as well as potential fee arrangements and liquidity options.

The board of the targeted investment trusts have responded with even stronger language. One, run by Scottish investment giant Baillie Gifford, stated that is was “appalled by Saba’s actions and conduct”.

Meanwhile, Saba is flinging mud right back, accusing the trusts and those supporting them of making false and misleading claims.

Voting deadlines for the decision are fast approaching, with the first of them, for Herald Investment Trust, due to vote on 22 January. Five trusts have deadlines between 29 and 31 January, other than Edinburgh Worldwide which is set to vote on Valentines Day.

Turnout at shareholder meetings for trusts is often low. Peel Hunt has estimated an average of only 35 per cent of shares vote on corporate policy. Saba’s stake in the trusts, which ranges between 19 and 29 per cent, will therefore mean it has a chance of pushing its proposals over the line and winning board seats across the companies.

So, should investors in these trusts be worried about what a Saba takeover could do? And is there any merit to Saba’s criticism?

Saba’s central claim is that the current boards have failed to hold the investment managers at Baillie Gifford, Janus Henderson, Herald Investment Management and Manulife, to account.



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