Herald trust saved after Saba and Aberdeen ink deal
Aberdeen and US activist hedge fund Saba have reached agreement for the Scottish investment juggernaut to manage Herald Investment Trust, ending a years-long arm wrestle over the trust’s future.
In an eleventh-hour deal that will save Herald from being wound down, Aberdeen will recruit eight of the fund’s staff – including fund manager Katie Potts – and take reins of the £1.5bn trust, the companies said in a statement on Thursday.
The rapprochement was overseen by Herald’s largest shareholder, Saba, whose billionaire founder Boaz Weinstein has been engaged in a hard-fought battle to overhaul Herald’s governance and structure as part of a wider activist campaign on UK investment trusts.
The London-listed trust was on the brink of being wound down, with returns being handed back to shareholders, after Saba, a New York-based hedge fund that specialises in financial sector arbitrage opportunities, built up a 30 per cent stake in 2023.
Saba’s holding – one of eight in the UK investment trust sector – sparked an almighty tug of war over the direction and fate of Herald, leading to several shareholder showdowns, at which investors voted down Saba’s core proposals.
As part of the deal announced on Thursday, shareholders of the trust, which specialises in backing small-cap listed companies, will be given the opportunity to exit their investment before the management of the trust is transferred to Aberdeen. The trust has agreed to two-thirds of its shares to be offered at net asset value (NAV) as part of the process, known as a tender offer.
“This agreement draws nearly 18 months of significant uncertainty for Herald to a close, and we think it represents a good outcome for all shareholders,” said Emma Bird, investment trust analyst at Winterflood, adding: “The commitment by Saba to exit their holding in full removes a key uncertainty overhang and enables the fund to move forward with its long-term investment strategy with a more supportive shareholder base.”
Saba agreement ends tumultuous period for Herald
The tender offer will take place before the third quarter of 2026, at which stage what is remaining of the trust will move under the auspices of Aberdeen Investments, the fund management arm of the FTSE 250 investment giant.
Weinstein hailed the agreement as heralding another victory for Saba in its activist campaign against Britain’s investment trust sector, branding it a blueprint for effective engagement.
“Herald shareholders will now have real choice: immediate liquidity close to NAV, or continued exposure to the same strategy they believe in under a stronger institutional platform,” he said. “This is what shareholder engagement looks like when boards act in the interests of the people they serve, and it is what Saba will keep demanding across the UK investment trust sector.”
Under the terms of the deal, Saba is poised to exit from its stake as part of the tender offer, and has vowed not to undertake any more aggressive moves for four years.
The deal draws a line under a tumultuous period for the trust, which had been rocked by Weinstein’s dogged campaign despite its NAV having risen by 44 per cent in the past 12 months. Its investment strategy and mandate will remain the same under Aberdeen, founder Katie Potts said.
Herald shares popped by more than two per cent on Thursday morning, meaning its market capitalisation has now risen more than 25 per cent so far this year.
James Carthew, head of investment company research at Quotedata, played down any risk of the two-thirds tender offer being taken up in full by shareholders, calling the prospect “inconceivable”.
“I’m delighted that a way has been found for Herald to continue. It is a coup for Aberdeen to secure the trust and the services of Katie and her team,” he said. “It… is a unique way of accessing an exciting part of the market. If anything, investors should be thinking about buying stock now that the trust’s future is secure, I know I am.”