Saba Capital could extend its grip on the UK investment trust industry if it decides to use the up to $650m (£490m) it is expected to receive soon via tender offers from two BlackRock US funds that came under pressure from the activist.

The New York-based hedge fund could significantly bolster the war chest it has used to take the UK investment trust industry to task, having already invested north of £1.5bn in the sector amid an aggressive campaign.

At the end of April, Saba is due to receive as much as $289m from a tender offer kickstarted by New York-listed BlackRock Health Sciences Term Trust (BMEZ). As a ‘closed end fund’, or CEF, it is the equivalent of a UK investment trust.

While the terms of the tender confirm the fund will buy back 40% of its shares, Saba has agreed to tender 100% of its shares as part of a ‘standstill’ agreement not to pursue a range of BlackRock funds for another three years.

The activist hedge fund, which is led by Boaz Weinstein, owns just under 20.7m shares in BMEZ, according to a 20 January filing with the US Securities and Exchange Commission (SEC). 

The value of the holding has been hit by falling American stock prices – in the wake of the Trump administration’s worse-than-expected tariff plans – but was worth $289m when the market closed on Tuesday, according to Citywire calculations. 

The tender offer for BMEZ opened on 21 March and will run for 20 business days, with cash paid to shareholders seven days later, meaning Saba could have the money in its account at the end of this month.

This will be followed by another lump sum from BlackRock Technology and Private Equity Term Trust (BTX) at the end of July. This tender is larger at 50% of issued shares but as with BlackRock Health Sciences, Saba will seek to cash in its full stake.

Saba owns 60.7m shares in BTX worth an estimated $363m this week. The tender will open on 9 June and run to the same timeline as its stablemate, meaning money will be paid to shareholders by 15 July.

BTX was formerly known as BlackRock Innovation and Growth Term Trust and traded under the ticker BIGZ, but changed its name shortly after the BlackRock-Saba deal. 

The technology stock portfolio, which includes some unlisted holdings, has been hit hard amid volatility and falls for the Nasdaq this year, with its shares down about 21% year to date.

A statement in January reported that Saba would ‘tender all’ of its shares in the two closed-end funds. If that came to pass, based on latest holdings valuations, the firm would see a combined windfall of around $652m.

However, the underlying agreements say the tenders ‘shall not provide for preferential treatment for any shareholders’, meaning Saba may not be able to realise its full stakes if there is too much take-up from other investors. 

Saba declined to comment for this piece. BlackRock has been approached for comment.

However, Weinstein’s strategies are likely to see a big influx of cash under any scenario. 

According to Refinitiv data, Saba owns 20.5% in BMEZ, versus the 40% tender offer. Meanwhile it owns 28.5% in BTX versus the 50% scale of the tender. 

Assuming half of the overall shares were tendered in each case, Saba would still cash out its whole positon in the latter as well as most of its position in BMEZ. 

‘The industry is now a clear target’

Weinstein has been vocal about plans to continue buying investment trusts and take on boards and asset managers presiding over discounts. 

Alan Brierley, director of investment company research at Investec, told delegates at the Association of Investment Companies conference last month that Saba remains a threat to the investment trust industry given the large cash sums it has to play with.

‘While hard to verify, we are told its strategy [in its US funds] is seeing historic inflows,’ he said. ‘In addition, it will receive significant proceeds from two BlackRock tender offers in coming weeks and…this provides a material war chest.’

Brierley warned that ‘any equity trust at a double-digit discount is vulnerable’.

If Saba has any success then Brierley said it was ‘only a question of time before other activists enter the fray’ and he is ‘already picking up noise that play books are already being dusted off’.

‘We have to accept that the industry is now a clear target and we must act accordingly,’ he said.

The significant tender offers in the US were agreed by BlackRock and Saba following a years-long battle between the investment giants, as the activist pushed for sweeping management changes at the funds, much as it did when it requisitioned seven UK trusts earlier this year before being out-voted by other shareholders. 

Saba has ultimately been successful in its dealings with BlackRock in the US, with shareholders receiving a large payout. But in return, Saba has had to agree to effectively leave 50 BlackRock closed-end funds, including BMEZ and BTX, alone until 2027.

In the UK, the terms of the same basic deal were extended to four investment trusts – BlackRock World Mining (BRWM ), BlackRock Energy and Resources Income (BERI ), BlackRock American Income (BRAI ), and BlackRock Smaller Companies (BRSC ) – though not all BlackRock trust boards signed up, potentially due to the optics.

Under the proposals, Saba confirmed it will not requisition any trust or put forward proposals to shareholders. It will refrain from trying to change the composition of the boards, and will also not try to ‘control or influence’ the trusts, their policies, or managers.

Since facing defeat in seven shareholder votes in January and Feburary, before striking a second time with proposals to ‘open-end’ four trusts, there is a sense that Saba has softened its tactics a bit. 

Any hopes of turning a UK investment trust into a vehicle to attack other discounted trusts may be gone, with Saba seemingly happy to achieve exits at close to NAV.

This week, the firm concluded negotiating a 42.5% tender offer at European Smaller Companies (ESCT ). 

Weinstein took to X to hail the ‘latest win’. ‘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,’ he added.