Aberdeen Investments has struck an agreement with activist hedge fund Saba Capital to takeover management of the Herald Investment Trust (LON:HRIL) in a move that will preserve its strategy.
It comes as Saba has been building a sizeable stake in numerous UK investment trusts since late 2024 in an attempt to restore closed-ended funds with large discounts to net asset value that it believes are underperforming.
Just last week, Saba landed its first victory in its ongoing attempts to displace the boards of several investment trusts by securing control of Edinburgh Worldwide (LON:EWI).
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Herald Investment Trust has also been one of its primary targets in recent years but the new deal with Aberdeen Investments means Saba will now end its interest and exit the fund.
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A stock market updated from Herald Investment Trust confirmed a proposed tender offer from Aberdeen for up to 66% of its issued share capital, which will allow Saba, its largest shareholder, an exit at close to net asset value.
Saba has agreed to the deal, as well as a three-year agreement to not exercise any voting rights on any resolutions proposed at any annual or other general meeting of the investment trust against the recommendation of the board.
Richard Stone, chief executive of the Association of Investment Companies (AIC), an industry body that represents UK investment trusts, said: “This is a successful outcome for shareholders.
“It’s excellent to see proposals that will allow Herald Investment Trust to continue to deliver strong returns for its shareholders. We’d like to congratulate the board of Herald and Aberdeen Investments on this creative solution.”
What does the Aberdeen deal with Herald Investment Trust mean for investors?
Investors have been on alert about Saba’s intentions towards discounted investment trusts and this move will end its interest in Herald, as well as other Aberdeen trusts.
As well as the three-year commitment to effectively not interfere with Herald, there is also a provision in the deal with Saba that would allow a further eight investment trusts in Aberdeen’s range to opt in to a similar arrangement if their boards decide to do so.
Under the proposed agreement, eight of Herald's staff, including lead manager Katie Potts, are expected to join Aberdeen.
The team will relocate to Aberdeen’s London office, and gain access to Aberdeen’s distribution and marketing capabilities.
The deal still has to go through regulatory approvals but a general meeting will be held towards the end of the month, and if approved, it is expected to complete in July.
Aberdeen will then become the investment manager.
This means investors won’t have to worry about uncertainty caused by a Saba takeover, which critics said may have created a more short-term focus.
Jason Windsor, chief executive of Aberdeen Group, said: “The Herald team has a long track record of backing early-stage technology companies, and driving material long term growth from those investments.
“As the fifth largest manager of closed-end funds globally, and as a leading small cap manager, we are delighted to welcome Katie Potts and her team to Aberdeen. Completion of this transaction will further grow our franchise and demonstrates our innovation and commitment to the sector.”
Potts said the investment trust’s focus will remain firmly on the technology and communications sectors, which she said continue to benefit from exceptional innovation and strong long-term growth prospects.
The AIC's Stone added: “Herald is a unique investment trust, backing high-growth tech and communications businesses, led by Potts, one of the longest serving managers in the industry. Long may it continue."
