Saba digs into war chest to buy new stakes in two trusts

Buoyed with cash from recent successes, Boaz Weinstein's firm is building new stakes in London's investment trust sector.

US activist Saba Capital has disclosed new stakes in two investment trusts, Utilico Emerging Markets (UEM ) and Worldwide Healthcare (WWH ). 

The Boaz Weinstein-run New York hedge fund, having been buoyed by cash from several exits this year, disclosed on Friday that it had acquired 5.4% of voting rights in Worldwide Healthcare. That equates to an around £74m position in the £1.4bn specialist equities trust.

A stock exchange filing followed today revealing Saba’s 5.7% stake in £423m Utilico Emerging Markets.

Saba has launched high-profile campaigns targeting investment trusts with mixed results in the last six months. However, the new positions seem to make good on Weinstein’s previous commitments to recycle capital into the sector and exert fresh pressure on more targets, following recent successes such as at European Smaller Companies Trust (ESCT ). 

Both UEM and WWH currently trade at double digit discounts, making them a target for value investors who try to profit by pressuring investment trust boards to return money close to net asset value (NAV) or drive a rerating in the shares. 

UEM, which invests in infrastructure and utility companies in developing markets, closed on Friday at a 15.6% discount to NAV, and has proven particularly attractive to those running discount-hunting strategies. Its top shareholders, now joined by Saba, already include City of London Investment Management (14.7%), Lazard Asset Management (10.1%), 1607 Capital Partners (5.7%) and Allspring (3.1%), according to Refinitiv data.

WHH, which invests globally in pharmaceutical and biotechnology companies, trades at a slightly narrower 11.4% discount. It has been a recent laggard, however, with portfolio performance running behind broad healthcare indices over one, three and five years. 

As is typical of Saba, the positions are held through a mix of shares and total return swaps, a type of derivative.

Saba declined to comment.

Weinstein’s war chest 

Saba has generated a significant amount of cash from exits so far this year. 

In January, the firm profited from wins against two Blackrock closed-end funds (CEFs) in the US – the result of a long-running campaign against the asset management giant which predates its action against UK trusts. 

The two BlackRock funds, with combined assets of $3.6bn, agreed to tender 40% and 50% of their respective shares, while Saba in turn agreed to end its involvement with 48 other Blackrock CEFs, as well as a handful of investment trusts. 

According to previous Citywire calculations, Saba was due an around $290m (£214m) windfall from the first tender at BlackRock Health Sciences Term Trust (BMEZ) last month. 

Speaking at the Association of Investment Companies conference in March, Alan Brierley, director of investment company research at Investec, also referenced ‘historic inflows’ received by Saba in its US funds in recent months, warning vulnerable UK trusts that this ‘provides a material war chest’. 

The hedge fund has also benefitted from a spike in buyback and wind-up activity in the UK trusts sector this year.

Saba has recently pushed for the conversation Middlefield Canadian Income (MCT ) into an active ETF and taken advantage of a bumper tender offer at European Smaller Companies which will allow the eventual realisation of its 29% stake. 

‘For those keeping score on the seven trusts we launched our campaign against in December: three down, four to go — with many more to come,’ said Weinstein on X, following ESCT’s initial announcement. 

Saba has also benefitted from the liquidation of Henderson Opportunities, while Keystone Positive Change is in the process of winding up.