CNBC's UK Exchange newsletter: The battle for Britain’s investment trusts

Core Viewpoint - The U.K. investment trust sector is currently experiencing significant attention due to activist investor Boaz Weinstein's campaign to influence the boards of several trusts, despite the sector traditionally being viewed as unexciting [1][2]. Group 1: Activist Investor Actions - Boaz Weinstein, founder of Saba Capital, launched a campaign in December 2024 to oust the boards of seven investment trusts, electrifying the investment trust landscape [3]. - Saba Capital requisitioned general meetings at three trusts managed by Baillie Gifford and two by Janus Henderson, as well as targeting the CQS Natural Resources Growth & Income Trust and Herald Investment Trust [4][5]. - Weinstein's strategy aims to replicate his previous successes in the U.S. by addressing the significant discounts at which these trusts were trading compared to their net asset values [6]. Group 2: Shareholder Votes and Stakes - Despite acquiring stakes between 19% and 29% in the targeted trusts, Saba was defeated in all seven shareholder votes by Valentine's Day last year [7]. - Following the previous vote, Saba increased its stake in the Edinburgh Worldwide Investment Trust (EWIT) from 25% to over 30%, indicating a renewed effort to influence the board [9]. Group 3: Legal and Financial Implications - Weinstein has threatened legal action against EWIT for not providing sufficient information regarding its sale of part of its stake in SpaceX, which reportedly left £37 million on the table [10][11]. - EWIT's decision to sell part of its SpaceX stake was justified as necessary to comply with a self-imposed rule regarding asset allocation, although the optics of the sale have raised concerns [12]. Group 4: Market Impact and Reactions - Weinstein's aggressive tactics have prompted some trusts to take action to reduce their share price discounts, with Herald announcing a tender offer to shareholders [13]. - The average investment trust discount remains at 15%, a level not seen since between June 1997 and January 2001, indicating a potential area for improvement within the sector [14].