A chess-playing hedge fund manager who was once banned from a London casino for counting cards is making waves in the investment trust sector with an ambitious £2 billion restructuring plan.
Boaz Weinstein, the chief investment officer of Saba Capital Management, has accumulated substantial positions in seven London-listed investment trusts, setting the stage for what industry experts describe as an ‘existential crisis’ for the sector.
The renowned Wall Street trader, who gained prominence during the 2012 London Whale trading incident that cost JP Morgan £6 billion, is targeting trusts managed by prestigious firms including Baillie Gifford and Janus Henderson. His strategy centres on exploiting the significant discounts at which these trusts trade relative to their net asset values.
The Victorian-era investment trust structure, designed to provide investors with diversified exposure through a single share, has recently fallen out of favour. Rising interest rates have led investors to prefer safer alternatives, resulting in trusts trading at an average 15 per cent discount to their underlying assets.
Saba Capital’s intervention spans seven trusts with positions worth £1.5 billion, though market speculation suggests the fund’s total sector exposure could reach £1.9 billion. Weinstein’s immediate objective is to secure board representation and potentially replace current fund managers.
The targeted trusts are mounting their defence, with European Smaller Companies Trust chairman James Williams stating there is “no basis for Saba’s activist approach other than an attempt to exploit its position.” Christian Pittard, head of investment trusts at Abrdn, emphasised the unprecedented nature of the situation, describing it as unlike anything witnessed in the sector’s 150-year history.
Sources close to Saba Capital indicate Weinstein is preparing for a prolonged campaign, with plans to establish a London office, signalling his long-term commitment to reshaping the UK investment trust landscape.
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