Britain's investment trust sector is facing a governance crisis that regulators appear ill-equipped — or unwilling — to address. At the center of the storm is Boaz Weinstein, the New York-based founder of Saba Capital Management, whose campaign to seize control of multiple UK closed-end funds has exposed a yawning gap in the Financial Conduct Authority's rulebook. Now, trust chairs are speaking out, and their frustration with the watchdog is barely contained.
The Mechanics of a Hostile Takeover Campaign
To understand why this matters, it helps to understand what Saba Capital is actually doing — and why it's so effective. Investment trusts are closed-end funds listed on the London Stock Exchange. Unlike open-ended funds, they have a fixed number of shares that trade on the market, often at a discount to their underlying net asset value (NAV). That discount is Saba's entry point.
Weinstein has built a reputation for targeting investment trusts trading at persistent discounts, buying large stakes cheaply, then applying pressure to close that gap — either by forcing asset sales, demanding restructuring, or installing sympathetic directors who will wind down the fund and distribute assets to shareholders. On paper, this sounds like activist investing doing what it's supposed to: holding underperforming boards to account. In practice, the strategy is far more aggressive, and its victims argue it prioritises Saba's short-term exit over the long-term interests of ordinary shareholders who have held these funds for years.
The critical structural vulnerability is this: Saba doesn't need majority control to be disruptive. With a stake around 25-30%, it can block special resolutions that require a 75% supermajority — including amendments to a trust's articles of association. This creates an asymmetric war of attrition that Jonathan Simpson-Dent, chair of Edinburgh Worldwide, described with stark clarity: "He only needs to win once whereas the board needs to win every time."
The FCA's Blind Spot
The regulator's response has been widely criticised as inadequate and tone-deaf. Simon Walls, the FCA's head of markets, suggested in a recent blog post that trusts could protect themselves by taking legal action or amending their articles of association. Both chairs dismissed this advice as demonstrating a fundamental misunderstanding of how company law actually operates in this context.
The article-amendment route, as Simpson-Dent pointed out, requires that 75% supermajority vote — precisely the threshold Saba's blocking stake is designed to prevent. Legal action, meanwhile, is expensive, time-consuming, and offers no guarantee of success given that Saba is operating within existing rules. Glen Suarez of Impax Environmental Markets was blunt: "I get the impression he doesn't understand the issue."
This isn't merely a clash of personalities. It reflects a deeper institutional problem at the FCA. The watchdog was designed primarily to regulate financial products and market conduct, not to adjudicate the kind of corporate governance warfare that Weinstein's playbook represents. The review the FCA has now announced — prompted by Saba's campaign — risks arriving after the damage is done. As Simpson-Dent put it with grim resignation: "We will see blood on the floor before the FCA takes action."
A Pattern Repeating Itself
Saba's UK campaign didn't emerge from nowhere. Weinstein ran similar strategies in the United States, where closed-end fund activism is more established and the regulatory framework more developed. In the UK, however, the investment trust structure has historically been seen as relatively protected — boards have meaningful independence, and retail shareholders have traditionally formed a loyal, engaged base.
That assumption is now under strain. Saba has taken significant stakes in at least seven UK investment trusts, including Herald Investment Trust, Keystone Positive Change, and CQS Natural Resources Growth and Income, alongside Edinburgh Worldwide and Impax Environmental Markets. The breadth of the campaign signals that this is not opportunistic target selection but a systematic strategy to exploit structural weaknesses in the UK market.
Richard Stone of the Association of Investment Companies framed the wider stakes accurately: the UK has already lost ground as a listing venue, with multiple companies choosing New York or Amsterdam over London in recent years. Losing investment trusts — particularly specialist vehicles like Impax, which invests in environmental markets, or Edinburgh Worldwide, which holds stakes in companies including SpaceX — would further diminish the London market's depth and diversity.
What Retail Investors Are Actually Facing
For ordinary shareholders in these trusts, the situation is genuinely uncomfortable. If Saba succeeds in gaining board control, the likely outcome is a wind-down or restructuring that prioritises quick asset liquidation over the long-term investment thesis that attracted retail holders in the first place. Specialist trusts like Impax, which hold illiquid or unlisted assets, may find that a forced sale crystallises losses that a longer holding period would have avoided.
Both trusts have responded by launching exit tender offers — mechanisms that allow shareholders to sell their holdings back to the trust at close to NAV, giving those who don't want to remain in a Saba-controlled vehicle a dignified exit. Suarez urged shareholders to participate promptly; some platforms were closing the Impax vote as early as April 10, with a formal deadline of 11am on April 14. The Edinburgh Worldwide tender offer deadline was 2pm on April 8.
The tender offer route is pragmatic, but it carries its own risks. If enough shareholders exit, the trust may shrink to a scale where ongoing costs become uneconomical, effectively forcing a wind-down regardless of Saba's next move. It's an uncomfortable position for boards who have spent years building these vehicles.
The Regulatory Reckoning Ahead
The FCA's review of investment trust rules is underway, but its scope and ambition remain unclear. The regulator's public statements have been cautious, emphasising existing legal powers rather than signalling appetite for new protections. That caution may reflect genuine uncertainty about how to balance shareholder rights — after all, Saba is technically acting as a shareholder itself — with the need to prevent regulatory arbitrage.
The harder question is whether the UK's current framework is simply too permissive for sophisticated activist campaigns targeting retail-heavy funds. Several reforms could change the calculus: lowering the threshold for blocking special resolutions, requiring disclosure of activist intent when stakes cross certain thresholds, or creating cooling-off periods before new major shareholders can call extraordinary general meetings. None of these would require the FCA to take a view on whether Weinstein's campaign is right or wrong — only that the playing field needs rebalancing.
What's clear is that the status quo advantages the aggressor. The boards of Edinburgh Worldwide and Impax have won shareholder votes, maintained investor support, and launched protective measures — and they're still fighting for survival. If regulators don't close the loopholes Saba is exploiting, other activist funds will take note. The next campaign may be better resourced, more sophisticated, and even harder to resist.