- Saba has built stakes in UK trusts sitting on high discounts to net asset value
BlackRock has reached an agreement with activist hedge fund Saba Capital which it hopes will protect its London-listed investment trust from the disruption faced by peers.
It comes as Herald Investment Trust shareholders face a vote over the company’s future later today, amid Saba’s plans to overhaul and seize the boards and management of seven London-listed funds.
In four separate but near-identical statements published on Wednesday, BlackRock told Energy and Resources Income, American Income, Smaller Companies and World Mining investors that it had secured assurances from Saba it would not target the funds in a similar way.
Saba has been building stakes in UK trusts sitting on high discounts to net asset value.
The hedge fund, which critics accuse of ‘self interest’ and a cynical exploitation of low voter turnout, says it plans to merge ‘some or all’ seven investment trusts should it get its way in each vote.
It will then build a portfolio made up of other London-listed investment trusts, which Saba says it will engage with to narrow discounts.
BlackRock moves to protect London-listed hedge funds from Saba activism
BlackRock Smaller Companies was one of 21 London-listed investment trusts highlighted by broker Peel Hunt as being potentially vulnerable to the Saba takeover attempt, with the hedge fund having taken a notable stake in the company.
Saba does not currently hold stakes in the other three trusts.
The asset management giant said Saba had agreed not to put forward ‘any proposals to shareholders or requisition any resolution or general meeting’ of each of the companies.
Saba will not seek to make changes to the trusts’ boards or try to influence management of the funds, according to BlackRock.
The hedge fund has also agreed to back each board in any shareholder resolution, while refraining from targeting the trusts for short selling.
‘Saba will not engage in any takeover offer for the company’, BlackRock said of the agreement set to stay in place until 2027.
BlackRock added: ‘The company has given no monetary consideration to Saba or any of its affiliates in return for the benefits outlined above, and such benefits do not restrict the board’s or the company’s independence in any way.
‘The board is committed at all times to exercising the best standards of corporate governance, promoting the success of the company and putting first the interests of shareholders as a whole.’
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