- Over 240 activist investor campaigns were launched globally in 2024, the highest amount since 20181
- Last year more than 27 CEOs resigned as a result of activist pressure 2
- Saba Capital recently launched an activist campaign to seize control of 7 UK based investment trusts, but their proposal has been rejected at every meeting so far (6 held) 3
In mid-December of last year, Saba Capital a US based hedge fund launched an activist campaign to seize control of seven UK listed investment trusts. Having built up 19-29% stakes in each of the trusts, Saba published an open letter urging other shareholders to replace the board of directors as well as the fund managers due to ongoing underperformance. They notably proposed to replace all trust directors with their own named directors Boaz Weinstein (Saba CEO) or Paul Khasidy (Portfolio Manager at Saba), merge unpopular trusts, buy back shares and invest more in private assets1.
While there has been a steep rise in investor activism over the past decade, this campaign grabbed headlines for being particularly co-ordinated and although voting has rejected Saba’s proposals thus far (6 of the 7 general meetings have taken place, with the last to be held next Friday), it has inspired a wave of action within the UK investment trust space that was arguably overdue.
Saba’s targets
Investment trusts are listed vehicles which means that their price is determined as a result of supply and demand factors. When the sector is out of favour or the management team are viewed negatively and demand is low, this results in a lower share price. Each of Saba’s targeted trusts have been trading below their net asset value, a position widely referred to as ‘at a discount’.
The seven trusts targeted:
- Baillie Gifford US Growth (USA)
- CQS Natural Resources Growth & Income (CYN)
- Edinburgh Worldwide (EWI)
- European Smaller Companies (ESCT)
- Henderson Opportunities (HOT)
- Herald Investment Trust (HRI)
- Keystone Positive Change (KPC)
Below we can see each trusts average discount over a 3-year period as well as their total return vs their respective benchmark.
Source: This is Money as at 12 December 2024
What has the campaign achieved?
Although the campaign hasn’t delivered Saba’s desired outcome, it has prompted some managers to review their strategies and, in some cases, implement a series of measures to enhance future performance. For example, Baillie Gifford have proposed to make the Edinburgh Worldwide trust a joint responsibility amongst three managers instead of one, reduce the number of holdings within the portfolio and increase their universe of investable companies1.
It is important to remember that even well-managed companies with strong financials can become takeover targets if their stock is undervalued, making them appealing to activists looking to unlock shareholder value through strategic changes. Trumps election arguably energises activists outlook as deregulation and increased operational flexibility create merger and acquisition opportunities4.
Bowmore portfolios
We don’t hold exposure to any of the seven investment trusts that Saba has recently targeted. However, investment trusts can be an attractive way to access a broad range of underlying assets that are not available via other products. This is especially true within the property sector, since real estate investment trusts (REIT) aren’t forced to buy and sell property to meet fund flows and redemptions, their shares are rather dealt through a listed exchange. Due to this, we choose to gain our property exposure via the Picton Property Income real estate investment trust (REIT). The REIT consists of 48 UK properties within the office, industrial, retail and leisure sectors and currently yields 5.76%.
Source: LSEG Datastream as at 06/02/2025
Sources:
1 Barclays, 2025
2Â Forbes, 2025
3 Â Morningstar, 2025
4 Apco worldwide, 2025
