Saba Capital CEO Boaz Weinstein has hit back at criticism over the firm’s plans to gain control of seven investment trusts.
Over the past year, the US hedge fund has built large positions in Baillie Gifford US Growth; CQS Natural Resources Growth & Income; Edinburgh Worldwide; European Smaller Companies; Henderson Opportunities trust; Herald and Keystone Positive Change investment trusts.
Votes will be held in the coming weeks over Saba’s proposal to replace the boards of each trust with its own directors.
See also: Home REIT publishes overdue 2023 results as board steps down
In a webinar held today (14 January), the Saba Capital founder said that if the firm is successful in replacing the current boards, Saba would seek to merge either some or all of the trusts into a new listed vehicle and invest back into UK assets.
“If we’re given the opportunity, we would launch this Saba product that I think the UK sorely needs, given how every institution has been a seller,” said Weinstein.
“We are the white knight of the UK market. Everyone is a seller, we are a buyer.”
He added: “We are here to not just buy your trusts, we are here to buy billions more and rehabilitate this broken set of trusts and what is – in some ways – a broken industry that hasn’t been able to grow.”
He also took aim at the current boards of the seven trusts, criticising them for poor performance and having a lack of ‘skin in the game’.
Speaking to investors, Weinstein added: “This discount is not some ephemeral thing. It is costing ‘mom and pop’ investors in these trusts enormous amounts of money year in and year out. We are on the same side as you. We are invested alongside of you.”
Meanwhile, he also claimed that Saba’s action has already generated returns for investors with discounts narrowing over the last month.
“My prediction is in the coming three months, many of the trusts 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-end fund space in general will see smaller discounts, especially if we win and we have this fire power to buy up UK trusts. We’re talking about 83.3% invested outside of the UK that we may bring up to 100% invested in the UK.”
He also criticised aspects of the coverage of Saba’s plans, claiming that information provided by trust boards to shareholders comparing the performance of Saba’s own funds was “blatantly incorrect”.
See also: Update: Saba plans full cash exit option for Herald
Board independence
A large part of the concerns over Saba’s plans has been over the independence of boards, given that Saba is aiming to replace each trust’s board with directors who would be affiliated with Saba.
However, he said that having just two board members would be a temporary measure, with independent NEDs being appointed later on.
Reacting to the webinar, Laith Khalaf, head of investment analysis, AJ Bell, said that if Saba wins some of the forthcoming votes, the investment trust industry may have to prepare for more of the same.
“Whatever the results of the upcoming shareholder votes it will be interesting to see if the arrival of Saba prompts investment trust boards to take more measures to address large discounts,” he said.
“Shareholders will soon get the final say on whether Saba carries the day or not. Investors in each trust need to carefully examine the options and arguments laid out before them, both by Saba and the existing board, before coming to a decision and voting their shares.
The first vote will take place on 22 January, where Herald investors will have the opportunity to either back Saba or the current board.