Boaz Weinstein's Campaign to Revitalize Struggling UK Trusts

Boaz Weinstein, the hedge fund manager behind Saba Capital Management, has set his sights on the UK investment trust sector, aiming to revitalize struggling funds and profit from the narrowing of discounts. Weinstein's strategy involves buying stakes in trusts trading at significant discounts to their net asset value (NAV), exerting pressure on management to drive change, and potentially pushing for board representation or 'open-ending' the funds.

Weinstein's campaign has already targeted several UK investment trusts, including BlackRock Smaller Companies (BRSC), Schroder UK Mid Cap (SCP), JP Morgan European Discovery (JEDT), Henderson Opportunities (HOT), and European Opportunities (EOT). These trusts share common characteristics: they are equity trusts, have struggled with discounts to NAV, and are managed by prominent asset managers. Weinstein's strategy appears to be buying stakes in these trusts, potentially exerting pressure for change, as seen in his recent 5% stake in EOT ahead of a continuation vote.

Weinstein's focus on closed-end funds and NAV discounts sets him apart from traditional activist investors. Unlike other activists who often focus on corporate governance or operational improvements, Weinstein's strategy is centered around closed-end funds and NAV discounts. By buying stakes in these trusts, he aims to collapse the discount and profit from the arbitrage opportunity. This approach is reminiscent of his successful campaign in the US against BlackRock's closed-end funds, where he pushed for actions like representation on boards and 'open-ending' CEFs.



Weinstein's strategy of engaging with boards and pushing for 'open-ending' funds is unique in its focus on closed-end funds (CEFs). Unlike traditional activist investors who often target undervalued companies, Weinstein is exploiting the discounts between CEFs' market prices and their NAVs. By buying stakes in CEFs trading at significant discounts, Weinstein aims to collapse these discounts by exerting pressure on boards to 'open-end' the funds, allowing investors to redeem shares at NAV. This approach differs from other activists as it targets the fund structure itself rather than the underlying investments. Additionally, Weinstein's strategy is more aligned with the interests of long-term investors, as 'open-ending' CEFs can help stabilize their prices and reduce the risk of forced selling.

Weinstein's background in credit and arbitrage strategies has significantly influenced his investment decisions and activist campaigns in the UK trust sector. His expertise in global credit trading at Deutsche Bank has equipped him with a deep understanding of market inefficiencies and opportunities for arbitrage. This expertise has led him to focus on investment trusts trading at substantial discounts to their NAV, presenting an attractive entry point for value-oriented investors. Weinstein's activist approach, as seen in his high-profile battle with BlackRock over US closed-end funds, demonstrates his willingness to engage with management and push for changes that could unlock value for shareholders. By applying his credit and arbitrage strategies to the UK trust sector, Weinstein aims to capitalize on market inefficiencies and drive improvements in the performance of struggling investment trusts.

Weinstein's campaign to take over struggling UK trusts faces several potential risks and challenges. Firstly, Weinstein may encounter resistance from existing management and boards, who may be reluctant to cede control. Secondly, Weinstein's success will depend on his ability to convince other shareholders to support his proposals, which could be difficult if they disagree with his strategies or have conflicting interests. Additionally, Weinstein's campaign may be hindered by regulatory hurdles, such as the UK's takeover code, which could limit his ability to acquire controlling stakes. Lastly, Weinstein's campaign could be impacted by market conditions, such as fluctuations in the value of the trusts' assets, which could affect the feasibility of his takeover plans.

In conclusion, Boaz Weinstein's campaign to revitalize struggling UK trusts is a unique and innovative approach to activist investing. By focusing on closed-end funds and NAV discounts, Weinstein aims to capitalize on market inefficiencies and drive improvements in the performance of struggling investment trusts. While his campaign faces potential risks and challenges, Weinstein's expertise in credit and arbitrage strategies, as well as his willingness to engage with management, positions him well to succeed in his mission to take over struggling UK trusts.