You could be forgiven for missing it as the world’s markets were gripped by fears over Iran. But following a campaign on these pages, City watchdogs are finally to review their rules to protect private investors against the likes of US raider Boaz Weinstein.
The Financial Conduct Authority (FCA) needs to act fast if it is to protect small shareholders caught up in Weinstein’s relentless effort to win control of a string of UK investment trusts through his vehicle Saba Capital.
Instead, true to form, it is embarking on a lengthy consultation. That simply allows Saba to carry on with its siege and to ride roughshod over the interests of the private shareholders the FCA should be there to defend.
It is a disgrace that the regulators have done nothing to end this saga, which has been going on for months.
Through Saba, Weinstein has taken stakes in investment trusts, seeking to take control without launching an official takeover bid and paying the usual premium. His modus operandi is to attempt to install his own directors and fund managers, in order to commandeer lucrative fees.
Some, though not all, targets have performed poorly, leaving a door open to opportunists like Weinstein claiming to want to improve performance.
Predator: Boaz Weinstein’s Saba Capital has been relentlessly trying to win control of a string of UK investment trusts
But a core issue is shareholder rights. Weinstein has so far been roundly voted down by other investors, yet the regulators have allowed him to carry on.
Two trusts, Herald and Impax Environmental Markets, are right at the sharp end. Both have offered investors the chance to sell their shares for the value of the underlying assets, minus costs.
Saba has obstructed that route, regardless of the wishes of private shareholders. That then leaves a nuclear option of an exit tender, which would allow non-Saba investors to leave but would also be likely to spell the end of the trust in its current form.
This all sounds arcane and complicated. It is – which is what makes it so attractive for the clever chaps at Saba to exploit: the hope is that most people will find it too much of a headscratcher, leaving them free to get on with their cynical game. The FCA has a duty to ensure this does not happen.
Investment trusts are extremely valuable to millions of British people, including those saving for a pension.
Impax has assets of £763m and is the only listed fund in the UK concentrating on environmental solutions – if it goes, private shareholders will have no obvious alternative. Herald, which invests in tech, has provided more than half a billion pounds of capital to UK listed companies in the past 30 years.
The £1.2billion trust is an excellent long-term performer and has outshone Saba’s own Capital Master Fund.
It would have turned a saver who had invested their ISA allowance since 1999 into a millionaire, according to the Association of Investment Companies.
If there is an exit tender, anyone who has made long-term gains would face a tax bill, at a time they did not choose.
Investment trusts are a way for small shareholders to invest in innovators that are otherwise inaccessible, such as Elon Musk’s Space X, TikTok owner Byte Dance and AI firm Anthropic.
Yet Weinstein’s behaviour risks making his targets – and potentially others – much less inviting to investors. Who would want to buy into a trust when he can force it to change strategy?
The FCA should put a stop to this vexatious charade now. It has been running far too long.
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