- Hedge fund CEO says UK ‘sorely needs’ Saba as investors shun market
The hedge fund behind a planned takeover of seven London-listed investment trusts has revealed plans for a new strategy it claims will help revitalise the entire sector.
Saba Capital is attempting to overhaul the boards of seven trusts it has built substantial stakes in and impose itself as investment manager.
The firm’s chief executive Boaz Weinstein told investors on Tuesday that, should investors back its plans in a series of crunch votes, Saba will merge all or some of the seven funds into a new London-listed vehicle.
The fund would buy up stakes in other investment trusts sitting on hefty discounts to net asset value.
Should the merged vehicle encompass all seven trusts, it would have an estimated net asset value of £3.9billion, with just 16.5 per cent invested in UK assets at inception.
Saba says it will aim to grow this proportion to 100 per cent of the trust’s portfolio.
Saba Capital chief executive Boaz Weinstein said the group’s intervention will boost the wider UK investment trust market
Weinstein told investors on Tuesday: ‘If we’re given the opportunity, [we will launch] this Saba product that I think the UK sorely needs, given how every [financial] institution has been a seller [of UK assets].
‘The fund will benefit from scale…[and] we’re going to put that money back into the UK. We are the white knight of the UK market. Everyone is a seller. We’re a buyer.
‘This is enormous amount of ammunition for us to buy all the beleaguered funds and help them go up in price.’
Saba also plans to engage with the investment trusts it holds stakes in via the new vehicle by encouraging them to use ‘shareholder friendly’ actions like share buybacks to help narrow discounts further.
Weinstein said the new vehicle would also ‘help the UK market create new investment trusts’, because ‘when they’re not at a discount the manager often offers a secondary offering, or comes up with a new product’.
Saba has accused the seven respective boards and management of failing to sufficiently tackle performance-related issues and persistent discounts to net asset value.
It is set to take its proposals to shareholders in a series of votes scheduled from 22 January to 5 February.
The trusts’ boards have urged shareholders to reject Saba’s ‘opportunistic’ approach, accusing the hedge fund of self-interest at the expense of other investors.
Directors have also highlighted the relatively high fees of Saba’s funds, suggesting investors could face similar charges should the hedge fund get its way, and accused the firm of ‘cherry picking’ data in order to distort perception of performance.
They further point to the fact that performance has recently improved and discounts have narrowed significantly. Saba, for its part, highlights its own investment as being the major driver of narrower discounts.
Saba will take its proposals to shareholders in a series of crunch votes
The wider UK investment sector has also chimed in, with analysts at Investec, Frostrow Capital and Evlyn Partners among the firms urging investors to back their current boards.
Meanwhile analysts at Peel Hunt have said there are around 17 London-listed investment trusts Saba has built stakes in that could be vulnerable to similar upheaval.
Broker Frostrow warned shareholders: ‘Saba are looking to rip you off by using an opportunistic moment in time to muscle in, and you out.’
Saba, which says it will offer investors ‘substantial liquidity should they want to sell, believes it has already made a positive impact for UK investors and the market.
‘My prediction is, in the coming three months, many of the funds that Saba holds will announce shareholder friendly actions that will make you additional hundreds of millions of pounds that you would not otherwise have made, because they want to head us off at the pass.
‘The entire UK closed-ended fund space in general will see smaller discounts, especially if we win and we have this dry powder firepower to buy up UK funds.’
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