Former Pensions Minister Ros Altmann has issued a stark warning to retail investors, wealth managers, and regulators. She cautions that the aggressive, short-term actions of US hedge fund Saba Capital pose a significant threat to the long-term, patient-capital model of the UK's investment trust sector.
The "Miserable Seven" and a Renewed Assault on Edinburgh Worldwide
In January 2025, Saba Capital launched what has been described as the most audacious attack ever seen on the UK investment trust industry. The hedge fund built stakes in seven UK-listed trusts, labelling them the "miserable seven," and attempted to remove their boards to install its own nominees. This amounted to a series of hostile takeover attempts.
Saba's strategy relied on the historical inertia of the many retail shareholders who populate investment trust registers, who often do not vote on corporate actions. However, in that instance, shareholders mobilised in large numbers, spurred by media coverage and the brazen nature of the proposals, and successfully rebuffed the fund's advances.
While some argue Saba's aggression served a purpose by jolting boards to address share price discounts and performance more seriously, its latest move suggests a return to hostile tactics. The fund has now set its sights on the Edinburgh Worldwide Investment Trust (EWIT).
A Playbook for Control: Saba's EWIT Gambit
Saba is seeking to sack EWIT's entire board and replace it with three candidates of its own choosing. Despite being presented as independent, their independence is questionable given they are selected by Saba. Furthermore, they do not appear to collectively possess the relevant experience of the incumbent board.
This follows a familiar playbook: gain control of the board, and thus the trust's assets, to freely pursue a short-term agenda for profit. Baroness Altmann emphasises that this renewed attack could signal similar actions against other UK trusts where Saba holds stakes.
The serious risk is that EWIT's retail investors may not fully grasp the situation and could fail to exercise their voting rights. A scenario where a determined hedge fund repeatedly attacks until shareholder fatigue or low turnout delivers it victory is not a healthy model of shareholder democracy.
Call to Action: Protecting the UK's Patient Capital Model
Under current rules, disruptive resolutions can pass unless enough shareholders actively vote against them. Given the Financial Conduct Authority's Consumer Duty rules, designed to protect retail investors from foreseeable harm, there is a question over whether regulators should ensure board-removal attempts must meet positive approval thresholds. This would involve ensuring investment platforms adequately inform clients and simplify the voting process.
In the meantime, Ros Altmann urges retail investors, wealth managers, pension trustees, and regulators to consider the long-term risks. Allowing short-term trading interests to undermine confidence in the closed-ended fund model threatens a system that has successfully channelled patient capital into innovative, long-term assets—areas where open-ended funds often struggle.
UK investment trusts are a cornerstone of the financial system, but their integrity depends on boards acting for all shareholders, not a vocal minority with a short-term horizon. If EWIT shareholders doubt this takeover serves their interests, they must make their voices heard by voting. Shareholders in all trusts must remain vigilant to protect their long-term success from raiders focused on quick gains.
