Trust boosts its defences after failed assault by Boaz Weinstein

Importance Score: 35 / 100

Investment Trust Boosts Defenses Against US Hedge Fund

The Schroder UK Mid Cap Fund, a £204 million investment trust, has proactively responded to pressure from US hedge fund Saba Capital, led by Wall Street financier Boaz Weinstein. In an effort to appease investors and deter further action from the activist investor, the trust has announced a series of measures including reduced management fees and enhanced shareholder voting rights. The fund, whose portfolio includes notable firms like Cranswick and Babcock, became a target for Weinstein’s Saba Capital last month when the hedge fund proposed a vote to convert the closed-ended fund into an open-ended structure.

Saba Capital’s Challenge

Saba Capital’s proposition to transition the Schroder UK Mid Cap Fund to an open-ended structure raised concerns about potential instability. Such a change could have triggered a scenario where a high volume of investors simultaneously seeking to withdraw their investments would make it challenging to sell shares.

Trust Responds with Investor-Centric Measures

Despite deeming Saba Capital’s initial request as invalid, the investment trust has stated its commitment to enhancing investor appeal. On Wednesday, the Schroder UK Mid Cap Fund unveiled plans to introduce changes aimed at strengthening its attractiveness to shareholders. Key among these initiatives is a reduction in management fees, designed to directly benefit investors by lowering costs.

Enhanced Shareholder Rights and Buybacks

In addition to fee reductions, the trust has committed to providing shareholders with increased influence over its future. A key feature of these changes is the introduction of shareholder votes every three years on whether the trust should continue to operate. The first of these votes is scheduled to take place in three years’ time. Furthermore, the fund announced its intention to increase share buyback activity. This measure is designed to mitigate the discount at which the trust’s shares trade relative to the net asset value of its holdings.

Changes Not Directly Linked to Saba

While these changes come shortly after Saba Capital’s intervention, a spokesperson for the Schroder UK Mid Cap Fund asserted that the implemented measures are ‘not a consequence of any negotiations’ with the activist investor. This suggests the trust’s response is a proactive step taken independently to improve investor confidence and fund performance.

Weinstein’s Previous Activist Efforts

Prior to targeting the Schroder UK Mid Cap Fund, Boaz Weinstein engaged in similar activist campaigns in December. Weinstein sought to replace the management teams of seven investment trusts, aiming to install himself and his associates. However, these prior attempts to overhaul trust leadership were unsuccessful.

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