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Hedge fund Saba Capital launched campaign against seven

trusts

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Five more trusts to hold votes, after Saba lost first vote

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Saba accuses trusts of poor performance, shares lag asset

values

By Sinead Cruise, Nell Mackenzie and Iain Withers

LONDON, Feb 2 (Reuters) - U.S. activist investor Boaz

Weinstein may have suffered a defeat in the first vote on his

plans to shake up Britain's investment trust industry, but

bosses in the 269 billion-pound ($333 billion) sector will not

be sleeping easy.

Weinstein's Saba Capital Management wants to seize control

of seven trusts it owns sizeable stakes in, after accusing the

160-year-old sector of widespread underperformance, which the

trusts reject.

In an initial salvo, shareholders in Herald Investment Trust

, the largest of the seven, voted decisively against

Saba's bid to unseat its board last week.

Next up are Baillie Gifford U.S. Growth Trust and

Keystone Positive Change Investment Trust, which hold

votes on Monday. Three others follow on Tuesday and Wednesday.

"Boards and managers have to take note as any trust

languishing with a liquid portfolio on a wide discount without

any discount control mechanism is vulnerable," said Daniel

Lockyer, Hawksmoor Investment Management senior fund manager.

Investment trusts are listed vehicles that individuals can

buy shares in to gain exposure to assets, from listed stocks to

hard-to-access private companies.

Their shares should trade broadly in line with the net value

of their assets (NAVs). But trust shares can fall out of favour,

creating big gaps between share prices and NAVs, and leaving

investors unable to cash out without leaving value behind.

Win or lose, Saba's battle looks likely to mean more

pressure on trusts to improve their performance.

"Saba's campaign has already set a powerful precedent," said

Sonia Falconieri, professor of finance at London's Bayes

Business School. "The message is clear: performance and

governance will remain under intense scrutiny."

WEINSTEIN SEEKS TO MERGE TRUSTS, BUY BACK SHARES

A Reuters analysis of the seven targeted trusts' most recent

accounts - filed between April and November last year - shows a

350-million pound total shortfall between the value of the

shares at the filing date and the 3.9-billion pound book value

of the assets the trusts held.

While those figures only capture a snapshot in time, the

filings show discounts are persistent.

Trusts say they have delivered respectable long-term

performance, that trading improved in 2024, and that they are

taking action to close discounts. They call Saba's campaign

self-serving.

Weinstein has vowed to fix performance by merging unpopular

trusts, buying back shares, and investing in more private assets

rather than large listed stocks.

In an interview before Herald's vote, Weinstein, who agreed

a standstill this month in a long-running battle with dozens of

BlackRock ( BLK ) trusts, told Reuters he was preparing for the

long haul.

"If we lose narrowly, we may win in some period not that far

thereafter," he said, adding that at least two institutional

investors had handed him fresh cash since his campaign went

public late 2024. He declined to name them.

In the meantime, trusts are trying to rally shareholders.

Edinburgh Worldwide Investment Trust's ( EWIIF ) Chair

Jonathan Simpson-Dent accepts discounts have widened. But he

said the sector was already focused on fixing it.

($1 = 0.8070 pounds)

(Editing by Tommy Reggiori Wilkes and Emelia Sithole-Matarise)