An exchange-traded fund that provides exposure to discounted UK investment trusts has been introduced by activist investor Saba Capital Management
The New York-based activist hedge fund Saba Capital Management (Saba), which has rocked the UK's investment trust market for the past 18 months, has introduced a product that allows investors to adopt its approach.
On March 5, Saba and exchange-traded fund (ETF) white-labeller HANetf introduced the Saba Capital Investment Trusts UCITS ETF (LON:UKIT).
Investment trusts with a UK domicile that are trading at a discount to net asset value (NAV) will be held by this actively managed ETF; these are the same investment trusts that Saba has been targeting since November 2024.
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Start your trial. According to Hector McNeil, co-founder and co-CEO of HANetf, "Saba brings deep expertise in the investment trust and closed-end fund universe, with a long track record of identifying opportunities created by discounts to NAV and corporate actions within the sector."
Building a stake in discounted closed-ended funds and then advocating for corporate actions that will short-term reduce the trust's discount are key components of Sabas's strategy as an activist investor. The term "closed-ended fund arbitrage" describes this.
CIO and founder of Sabas Boaz Weinstein, along with partner and portfolio manager Paul Kazarian, will oversee the ETF.
"With renewed focus on narrowing discounts creating an ideal environment for a trust-focused active ETF, the 250 billion+ UK investment trust sector is undergoing a fundamental realignment," Weinstein stated. "We created UKIT to enable investors to take advantage of this changing environment and profit from NAV discounts rather than be negatively impacted by them. A "
What types of investment trusts is Sabas ETF holding?
As of March 5, the top three non-cash holdings in the Sabas investment trust-focused ETF were the biotech-focused investment trust Syncona (LON:SYNC), the private equity investment trust Harbourvest (LON:HVPE), and IP Group PLC (LON:IPO), an investment firm that makes investments in technologically and scientifically innovative companies.
Edinburgh Worldwide (LON:EWI), the growth-oriented investment trust whose board Saba tried to replace earlier this year and at the beginning of 2025, was UKIT's fourth-largest holding.
In addition to Unite Group (LON:UTG), Pantheon International (LON:PIN), Henderson Smaller Companies (LON:HSL), Montanaro European Smaller Companies (LON:MTE), Polar Capital Technology (LON:PCT), Baillie Gifford Japan (LON:BGFD), Brown Advisory US Smaller Companies (LON:BASC), Bankers Investment Trust (LON:BNKR), Scottish American (LON:SAIN), and Schroder UK Mid Cap Fund (LON:SCP).
As of March 5, cash accounted for 55% of UKIT's assets.
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