Boaz Weinstein’s Saba pauses activism against 9 UK funds after Herald deal

Saba Capital, the hedge fund led by Boaz Weinstein, has agreed to a three-year pause to its activist campaign against up to nine London-listed funds after a deal to secure the future of the Herald Investment Trust.

Herald on Thursday announced a tender offer for up to 66% of its issued share capital, intended to allow Saba – its largest shareholder – and other investors to sell at near net asset value or remain invested.

It comes after activist Saba declared victory in a controversial battle with SpaceX investor Edinburgh Worldwide last month, in which it ousted the chair and five board members after a long-running fight.

Saba, which has agreed to an irrevocable undertaking to tender its full holding in Herald, looks set to benefit significantly from the agreement, given the trust has traded almost consistently at a discount to NAV since the hedge fund first bought a stake in 2023.

As part of the deal, stewardship of the fund will also be handed over to Aberdeen Investments later this year, with current fund manager and founder Katie Potts set to join the London-based firm alongside seven colleagues.

Potts said in a statement: "Herald has delivered a clear and successful investment strategy since 1994, and this disciplined approach will remain unchanged with Aberdeen.

"Our focus remains firmly on the technology and communications sectors, which continue to benefit from exceptional innovation and strong long-term growth prospects."

Saba said the agreement represents its sixth successful outcome out of seven original U.K. campaigns.

Herald is one of nearly 50 London-listed funds Saba has built positions in – representing a sixth of the entire market – as it has taken advantage of high discounts with the intention of overhauling strategies.

As part of the deal, Saba has agreed to a three-year standstill, meaning it will refrain from voting against Herald's board over the period.

Saba has also agreed to commit to similar standstill arrangements regarding eight other London-listed Aberdeen investment trusts, with combined assets of roughly $17 billion, should their independent boards decide to participate.

Christian Pittard, head of closed-end funds and managing director for corporate finance at Aberdeen Group, said Saba's "collaboration and determination to find a path forward that benefited all shareholders" had "made it possible to preserve this trust and, together, deliver an outcome that is positive for everyone".

"The agreement regarding our wider active UK trust range provides a pragmatic and constructive way forward and supports the stability of the trusts who sign up to the standstill," he said.

Herald continues to trade at a 9.7% discount to net asset value of just under £3.3 billion ($4.5 billion), according to the Association of Investment Companies.

However, this has narrowed significantly from a low of 25.2% in March 2022, and the trust has outperformed peers on a share price and NAV total return basis over the last three years.

"Both sides appear to be declaring victory, which is slightly odd," said AJ Bell head of financial analysis Danni Hewson in emailed comments to CNBC.

"While both sides have got something they want, it still feels like a compromise. Herald continues to operate, but risks giving up some of its assets. Saba bought cheaply and can sell a chunk at fair value, yet the standstill agreement means it is effectively silenced as an activist by Aberdeen.

"The investment trust industry has been tearing its hair out over the activist's meddling and might think the Herald outcome is the blueprint to follow if it means Saba can eventually go away."