Saba Capital Management, an activist investor hedge fund based in New York, has a sizeable stake in numerous UK investment trusts.
Since late 2024, Saba has been using these shareholdings to try to remove the boards of some of the trusts in question. As yet, it has been unsuccessful – but a persistent campaign this year with Edinburgh Worldwide (LON:EWI) (EWIT) in particular suggests that the activist investor will be happy to bring vote after vote on its propositions.
Rather than wait until shareholder apathy kicks in and one of Saba’s motions is carried, three investment trusts – EWIT, Impax Environmental Markets (LON:IEM) and Herald Investment Trust (LON:HRI) – are laying the groundwork to offer their shareholders an exit from a potential Saba-controlled trust.
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“The boards of Edinburgh Worldwide and Impax Environmental Markets have come to the same conclusion: it is better to allow shareholders the opportunity to exit their investment on fair terms than risk being trapped in a vehicle controlled by Saba,” said Richard Stone, chief executive of the Association of Investment Companies (AIC), an industry body that represents investment trusts.
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Both EWIT and Impax have already proposed motions that would enable shareholders to tender up to 100% of their shares. These proposals would only require a simple majority of shareholders’ support to go through, and so can do so without requiring Saba’s support.
Herald’s board is still in talks with Saba to agree a mutually agreeable solution that would give shareholders a choice of outcome – but it is preparing a similar backstop tender offer should these talks be unsuccessful.
In the event that these tender offers come about, it would likely lead to most non-Saba shareholders tendering their shares. That would leave almost all remaining shares in Saba’s hands, effectively giving the activist control of the remaining trust. It could also lead to the trusts having to de-list from the London Stock Exchange, if free float falls below the exchange’s 10% requirement.
If you are a shareholder in any of these trusts, you might be wondering what this means for your investment. Would a Saba takeover be beneficial for you? If not – or if the trust was forced to de-list – are there similar investments you can move your money into instead?
Do you want to hold a Saba-controlled investment trust?
As far as shareholders are concerned, Saba taking control (directly or indirectly) of your investment trust may not be a bad thing. Taken at face value the company’s strategy aims to turn around underperforming trusts, leading to gains for all shareholders.
You might want to take advantage of Saba’s activist moves with UK investment trusts. If so, you could buy the Saba Capital Investment Trusts UCITS ETF (LON:UKIT), an exchange-traded fund (ETF) targeting discounted UK investment trusts which Saba launched on 5 March.
However, you might not want to hold a trust that Saba controls. For one thing, hedge funds often approach investments with shorter time horizons in mind than most individual investors. Investment trusts like Herald, EWIT and Impax are, currently, geared towards long-term investors who are happy to wait years for gains to be realised.
Saba might have a different approach, likely focused more on making money quickly. While this wouldn’t be a bad thing, it might not align with your own investment strategy, risk tolerance, or your reasons for buying the trust in the first place.
Further, recent research has questioned whether Saba’s track record suggests it can deliver on its promises for investors. Investec analysts published a note in February which highlighted that since June 2021 when Saba was appointed adviser of Saba Capital Income & Opportunities Fund I (BRW, Not Rated) – a US-based closed-ended fund – the fund has persistently traded at a discount. That discount widened from 2.3% when Saba was appointed, to 14.6% in February 2026.
Independent voting advisors ISS, Glass Lewis and PIRC have all recommended that shareholders vote for EWIT’s proposed tender offer. The voting deadline is 2pm on 8 April, though some platforms may impose earlier deadlines; the AIC believes it could be as soon as 30 March on some platforms due to Easter bank holidays.
What are your options for exiting a Saba-dominated trust?
Each of the three investment trusts that may soon be issuing tender offers have different possible alternatives for current shareholders – assuming that they want a similar kind of investment, but don’t want to be left in a Saba-controlled vehicle.
So, the approach you might take could depend on which of the trusts you hold.
If you are an Impax shareholder, you could roll your investment over into the Impax Environmental Markets (Ireland) fund. This is an open-ended fund that has an almost identical strategy to the investment trust, and as such is a very similar investment – though shareholders should note that it isn’t identical. The investment trust, for example, makes use of gearing (borrowing to amplify returns), which the open-ended fund isn’t able to do.
EWIT is effectively unique. It is the only UK-based investment trust that invests in small, long-term growth opportunities and has the ability to invest in private companies. One of its private holdings – and its largest individual holding – is SpaceX, with this exposure being one of the key reasons many investors hold the trust.
While there is no direct replacement for EWIT, Matthew Read, head of production and senior research analyst at QuotedData, recommended that shareholders could roll their investments over into Scottish Mortgage (LON:SMT) or The Schiehallion Fund (LON:MNTS), both of which are managed, like EWIT, by Baillie Gifford and have large stakes in SpaceX.
Saba has said that it will recommend the board of directors it has nominated propose three options to EWIT shareholders should they be elected:
- Option 1: Tender immediately and exit at NAV (minus costs).
- Option 2: Tender following a potential SpaceX IPO or liquidity event – but prior to any potential change in investment mandate – at NAV minus costs.
- Option 3: Retain your investment in EWIT.
Saba has previously maintained that the board of directors it is nominating is fully independent, so there is no guarantee that the board would follow through on Saba’s recommendation if elected.
There is, similarly, no direct replacement for Herald. But unlike Impax or EWIT, its board remains in talks with Saba. Shareholders may yet be spared the choice of selling their shares or remaining in a Saba-controlled trust.
Could tendering your investment trust shares trigger a tax bill?
One final thing to consider before tendering your shares is whether doing so could leave you liable to paying a tax bill.
Tendering an entire shareholding in one go could easily leave you liable to paying capital gains tax on the profits, so this is something you will need to consider and plan for if you are a shareholder in these trusts.
Herald, though, has stated that it is attempting to find a tax-efficient way for shareholders to exit their positions, though it has stressed that there is no guarantee that this will be possible.
