Industry experts are unable to agree on the implications of Saba Capital’s newly launched ETF, with some arguing it could bring about a positive change, while others question if there is any appetite for a Saba product.
The US activist has launched the Saba Capital Investment Trusts UCITS ETF (UKIT), in partnership with HANetf.
The actively managed ETF will aim to achieve capital appreciation by investing in investment trusts trading at attractive discounts to net asset value (NAV).
It will invest in private and public equities, bonds as well as alternatives such as REITs and will be led by Saba CIO Boaz Weinstein and partner at the firm, Paul Kazarian.
Weinstein said: “We designed UKIT to help investors capitalise on this shifting landscape – empowering investors to profit from discounts to NAV, rather than suffer from them.”
While investment trust discounts have started to narrow from their post GFC highs, the average trust still trades on a 12.5% discount to NAV, according to data from the Association of Investment Companies (AIC), at the end of 2025.
The new ETF will allow investors to “support the long-term success of the UK trust market, and benefit from the record level of share buybacks” currently available to investors, according to Saba.
This launch follows nearly a year of divisive battles between the activist investor and the investment trust industry, kicked off by its initial campaign to replace several boards in late 2024.
See also: Saba Capital launches campaign to replace seven investment trust boards
For Darius McDermott, managing director at Chelsea Financial Services, the launch of this ETF signals “something deeper” even despite Saba’s “chequered” and sometimes “questionable” history of board interactions.
“While some industry participants in the trust world might not like it, the reality is that a lot of investors do not like being hostage to persistently wide discounts,” McDermott said.
As a result, while Saba may well be unpopular in some circles, it has arguably been the “shake-up the investment trust industry needs” and may ultimately bring about an overall positive change, he said.
Emma Bird, head of investment trust research at Winterflood, added the US activist’s presence has “concentrated the minds of boards on discount controls and shareholder engagement”.
Providing this kind of vehicle through an active ETF will likely “sharpen this focus further”, which could be another positive overall.
However, Bird warned there was several caveats. Investor appetite could be low, given the lack of support for Saba’s proposals among shareholders in resolutions so far this year as well as the 1.5% total expense ratio, which is a “reasonably high cost”, she said.
“We question whether Saba’s motivation is truly to drive returns by exploiting discount opportunities, given the reluctance to participate in full exits at close to NAV at a number of funds (such as Herald Investment Trust and Impax Environmental Markets*), or whether it is actually to gain control of the funds’ assets,” she added.
However, for David Batchelor, senior analyst at QuotedData, this launch comes with several cautions.
As an ETF, the new strategy will almost certainly need large liquid holdings to function, which will mean that the entire universe of investment companies is not available to the fund, Batchelor said.
Furthermore, other activist investors already exist in the space, such as AVI Global Trust and MIGO Opportunities, which lack the “baggage” that has built up around the US hedge fund.
Batchelor said: “It is hard to see who the market is here, given how little interest investors in investment companies have shown in dancing to Saba’s tune since they emerged on the scene, but we shall see.”
See also: ‘There isn’t any logic’: Experts react to Saba’s battle with Edinburgh Worldwide
