An activist investor in Scottish Mortgage Investment Trust PLC (LSE:SMT) reaped a purported 30% gain on a £100 million investment in the FTSE 100-listed investment trust last year.
The eventual size of US activist hedge fund Saba Capital's stake in SMT only emerged this week, with a US$11 million (£8.7m) position taken last spring and revealed in October, turning out to be part of a much larger US$100 million stake, Citywire reported.
Shares in SMT fell below 650p for the first time since May 2020, before climbing back above 700p in November and topping 800p just before the end of the year.
As of November, the $4.4 billion New York hedge fund had 10 declarable stakes above 5% in London investment trusts after topping up several of its existing investments - but the actual number of holdings was thought to be somewhat higher.
Saba, which is run by founder Boaz Weinstein (pictured), built the investment in SMT around April last year, when the Edinburgh-based trust sank to a three-year low.
The hedge fund exited following a 21% rebound in the fourth quarter, capitalising on a narrowing gap to net asset value (NAV).
The trust's commercial director at Baillie Gifford, Stewart Heggie, calculated Saba had bought in at a 20% discount and sold when the gap to NAV had narrowed to 10%, he told Citywire.
While Saba did not widely advertise its stake in SMT, it has been more vocal elsewhere in the investment trust sector, publishing two open letters to the board of the European Opportunities Trust PLC, calling for measures to return capital to shareholders and enhance shareholder value ahead of its continuation vote which is due on Wednesday.
Analyst Iain Scouller at Stifel pointed out that Saba's declared positions were in trusts that primarily invest in listed equities.
“We think this reflects a strategy of hedging (i.e shorting) the underlying company exposure in the trusts, possibly by shorting individual holdings or equity indices, maybe using ETFs as a proxy for these portfolios.”