U.S. activist investor Boaz Weinstein may have faced an initial setback in his bid to shake up Britain's $333 billion (£269 billion) investment trust industry, but the fight is far from over.
With more votes on the horizon, trust executives remain on high alert.
Weinstein’s firm, Saba Capital Management, has launched an aggressive campaign to take control of seven investment trusts in which it holds significant stakes. He argues that the 160-year-old sector is plagued by chronic underperformance—an accusation the targeted trusts strongly deny.
The first major battle unfolded last week when shareholders of Herald Investment Trust, the largest of the seven, decisively rejected Saba’s proposal to replace its board. However, the campaign is far from finished. Shareholders in Baillie Gifford U.S. Growth Trust and Keystone Positive Change Investment Trust are set to vote on Monday, with three additional trusts scheduled for votes on Tuesday and Wednesday.
Pressure Mounts on Underperforming Trusts
"Any trust with a liquid portfolio and a significant discount to net asset value (NAV) that lacks a discount control mechanism is at risk," said Daniel Lockyer, senior fund manager at Hawksmoor Investment Management.
Investment trusts are publicly traded vehicles that allow investors to gain exposure to a range of assets, from public stocks to private companies. Ideally, their share prices should reflect their underlying asset values. However, when investor sentiment wanes, trust shares can trade at deep discounts to their NAVs, leaving shareholders struggling to exit without sacrificing value.
Regardless of the outcome of Saba’s campaign, the push for reform is already driving greater scrutiny of trust performance.
"Saba’s campaign has set a strong precedent," noted Sonia Falconieri, a professor of finance at Bayes Business School in London. "The message is clear: performance and governance will remain under close watch."
Weinstein’s Strategy: Mergers and Buybacks
A Reuters analysis of the seven targeted trusts’ most recent financial filings, covering April to November 2023, revealed a combined £350 million shortfall between the trusts’ market values and the £3.9 billion book value of their assets. While these figures represent only a snapshot in time, they highlight the persistence of valuation discounts.
Trusts argue they have delivered solid long-term returns, seen improved trading in 2024, and are already working to narrow the discount gaps. They dismiss Saba’s campaign as self-serving.
Weinstein, however, remains committed to his agenda. He has proposed merging underperforming trusts, executing share buybacks, and increasing investment in private assets over large listed stocks.
Speaking to Reuters before the Herald vote, Weinstein—who recently reached a standstill agreement in a separate battle with multiple BlackRock trusts—made clear that he is in it for the long run.
"If we lose narrowly, we may still win in the near future," he said, revealing that at least two institutional investors had allocated fresh capital to Saba since the campaign went public in late 2024. He declined to disclose their identities.
Meanwhile, the targeted trusts are rallying their shareholders to resist Saba’s advances. Jonathan Simpson-Dent, Chair of the Edinburgh Worldwide Investment Trust, acknowledged that discounts have widened but insisted that the industry is already taking steps to address the issue.
As the votes continue, Britain’s investment trust sector faces mounting pressure to evolve—or risk further activist challenges.