Saba doubles Gore Street stake as RM Funds criticise poor interims

US hedge fund Saba Capital more than doubled its stake in Gore Street Energy Storage (GSF) prior to a poor set of interims on Monday that reignited criticism over valuations, costs and governance at the battery storage trust.

A regulatory filing yesterday showed Saba increased its holding in the £274m vehicle from 5.02% to 10.07% , primarily through total return swaps, making it the trust’s largest shareholder. 

The purchase crossed the notification threshold at the end of last week, prior to the release of GSF’s poor interims on Monday, which triggered 10% fall in shares.

Following the results, another large shareholder, RM Funds with its 6.6% stake in the trust as of November, published a critical statement calling for change ‘as a matter of urgency’. 

It said the persistence of GSF’s 40% discount to net asset value (NAV) reflected a ‘prolonged failure to convert a strong structural tailwind for battery storage into durable shareholder value’. Shares are down 22.9% since it went public in 2018 and roughly 47.6% over the past five years.

The investor highlighted a growing divergence within the listed battery energy storage peer group, alluding to Gresham House Energy Storage (GRID), which has risen sharply by 66.4% year-to-date.

‘Against that backdrop, the company’s continued deep discount is, in our view, an indictment of the incumbent investment management model and its track record,’ RM Funds said.

Earlier this year, the activist group requisitioned an extraordinary general meeting which triggered a board overhaul as over a quarter of shareholders voted to oust the existing line-up.  

Today’s note specified that criticism is not directed at the newly appointed directors, but at the legacy board and incumbent manager, adding RM Funds remains ‘open-minded as to what a refreshed board can deliver’,

Valuation concerns 

A key area of criticism was valuation discipline.

The trust’s Middleton battery project was singled out – a UK asset that remains pre-construction but was previously valued on an earnings-based discounted cash flow model rather than at cost. 

RM Funds questioned why the asset was treated as an ‘exception’ on the basis of its having secured a 15-year market contract. 

It noted Middleton has been written down by around 65% from its peak valuation and argued shareholders should not have been exposed to such significant valuation swings on an asset that has yet to be built.

The investor questioned the role of the audit committee in approving the approach and said shareholders were entitled to ask whether earlier valuations had inflated NAV and contributed to steep performance fees.

It also raised concerns over the use of manual adjustments to near-term revenue forecasts for UK assets, alongside selective benchmarking against Modo data, calling for a more ‘rigorous’ and ‘genuinely independent’ valuation process.

‘Fee-ding frenzy’

Fee calculations also came under scrutiny, with RM Funds calling out cost disclosure as ‘persistently inadequate’. 

The trust operates a complicated, multi-layered fee structure, which the investor calculates to have allowed the investment manager to collect around £41m in a four and a half year ‘fee-ding frenzy, rising to a projected £46m if these levels persist to the end of the year. 

Many of these fees cover services that are outsourced. 

RM Funds said ‘credible counterparties’ have already approached the company to provide investment management and related services on ‘materially better terms’. 

The investor expects the board to set out clear milestones and deliver tangible change in Q1 2026, adding if the share price does not improve substantially ‘further action’ – including pushing a continuation vote forward – will be taken.