According to the annual report of the firm’s $350m Saba Capital Income & Opportunities fund, the firm led by Boaz Weinstein has direct investment in at least 11 London-listed investment trusts, as of 31 October 2023.
Of the trusts owned directly, European Opportunities, Schroder UK Mid Cap and Schroder British Opportunities are among the fund’s most significant exposures, but regulatory disclosures indicate much larger holdings across the entire firm.
Nine of these trusts are also owned by the fund through total return swap trades, a contract popular with hedge funds that allow them to gain exposure to an underlying asset and benefit from its capital gains and income without owning it, in return for a fee.
Saba Capital increases stake in Herald and Edinburgh Worldwide
In total, Saba Capital Income & Opportunities has exposure to 33 UK investment trusts through total return swap trades, collectively representing $111,106,802 in value. The contracts are set to expire in October 2024, but they can be terminated before the expiration date.
Some of the names owned through total return swap trades include JPMorgan European Discovery ($29.4m), Scottish Mortgage ($11.2m), Polar Capital Technology ($4.8m) and Fidelity Emerging Markets ($8.1m).
Weinstein said closed‐ended funds were a “distinct contributor” to the fund’s strong performance over the last year, as discounts continued to widen in 2023, which he said provide a “rich opportunity set” for future investments.
According to the report, US and non‐US closed‐end funds have grown from 20% of AUM to 60% of AUM during the reporting period and are now the largest single asset exposure in the fund, with an average discount of approximately 15.6%.
Saba Capital eyes $500m for activist UK investment trust fund
Income & Opportunities is one of several of the firm’s vehicles building positions in UK closed-end funds. Last year, Investment Week revealed Saba Capital had sought to raise more than $500m over the summer for a fund focused on taking activist positions in UK investment trusts.
The strategy, which originally targeted 1 September 2023 for its launch date, was the second iteration of the firm’s CEF Special Opportunities fund, which launched in April 2023. Investment Week understands Saba Capital is currently growing a $3bn long exposure in UK investment trusts.
