The Activist’s Gambit: Saba’s Ongoing Revolution in UK Investment Trusts
3min read In the ever-evolving landscape of UK investment trusts, few players have sparked as much controversy—or catalyzed as many structural shifts—as Saba Capital Management. Once a fringe player in the sector, Saba has emerged as a formidable force in 2025, leveraging aggressive activism, strategic pivots, and a relentless focus on value creation. The results? A sector in flux, with boards scrambling to address trading discounts, fees, and liquidity concerns—or risk facing the hedge fund’s wrath.
The Campaigns Begin: Aggression and Setbacks
Saba’s 2025 playbook began with audacity. Targeting seven UK trusts—including Henderson Opportunities Trust and CQS Natural Resources Growth & Income—the firm demanded board overhauls and the ouster of incumbent investment managers. Armed with stakes ranging from 11% to nearly 30%, Saba framed its campaigns as a defense of shareholder interests, arguing that persistent trading discounts (often exceeding 20%) and poor performance proved institutional failure.
But the initial battles were lost. By early 2025, Saba had failed to secure a single board seat, with shareholders overwhelmingly rejecting its proposals. In the European Smaller Companies Trust (ESCT), for instance, non-Saba shareholders opposed the move by a staggering 98% margin.
Reinventing Strategy: From Control to Conversion
Defeat bred adaptation. In February 2025, Saba shifted tactics, requisitioning general meetings for four new trusts to push for structural overhauls: converting closed-end trusts into open-ended funds. This pivot, framed as a solution to discounts caused by illiquidity, marked a tactical masterstroke. Open-ended structures eliminate trading discounts by allowing daily redemptions at net asset value (NAV), a feature Saba’s founder Boaz Weinstein called a “logical evolution” for the sector.
The move also addressed a key vulnerability: Saba’s large stakes had become illiquid after failed board campaigns. By negotiating tender offers—such as the sale of 42.5% of its ESCT stake—it secured profits while avoiding prolonged entanglements. A reveals discounts narrowing by an average of 12% in targeted trusts, underscoring the strategy’s market impact.
Industry Tremors: A Sector Transformed
Saba’s pressure has rippled across the sector. The Association of Investment Companies (AIC) reported record merger activity in 2024, with trusts like Gresham House Energy Storage Fund adopting hybrid fee models (splitting management fees 50/50 between NAV and market cap). Meanwhile, the Bankers Investment Trust’s proposed anti-activist reforms—though ultimately withdrawn—highlighted the sector’s newfound urgency to preempt hostile campaigns.
The numbers speak plainly. By late 2024, UK trusts had seen a 15% surge in activist campaigns compared to 2023, with Saba’s influence extending far beyond its direct targets. A shows a 200% increase in such measures since 2023, directly tied to activist pressures.
Criticism and Contradictions
Not all praise Saba’s methods. Critics, including AIC head Richard Stone, warn that merging board and management roles—a Saba proposal—could create conflicts of interest. Retail investors, often unrepresented in voting, face disproportionate influence from large stakes, a tension the AIC now seeks to address via reforms.
Yet Saba’s pragmatism cannot be denied. Its £3.6 billion stake in 11 UK trusts as of early 2025 reflects confidence in the sector’s long-term potential. Even in defeat, Saba’s campaigns have unlocked value: ESCT’s share price rose above Saba’s entry cost, and tender offers enabled exits at profitable valuations.
Conclusion: A New Era for UK Investment Trusts
Saba’s 2025 campaign is a case study in adaptive activism. While it failed to capture boardrooms, its structural proposals and financial acumen have forced the sector into a reckoning. The data is unequivocal: trusts targeted by Saba saw discounts narrow by an average of 12%, while the broader sector’s governance and liquidity frameworks have been irrevocably altered.
Looking ahead, Saba’s playbook—combining shareholder pressure with tactical exits—sets a template for activists globally. With UK trusts accounting for 35% of European activism in 2024, the sector’s evolution will hinge on whether reforms can balance investor demands with long-term stability. For now, Saba remains a disruptor without rival, proving that even in defeat, persistence can rewrite the rules of the game.
