Activist hedge fund manager Saba Capital is preparing to launch an actively managed ETF aimed at exploiting share price discounts in the UK’s £267bn closed-end fund sector, according to a report by Quoted Data.

The Saba Capital Investment Trusts UCITS ETF is awaiting regulatory approval in Ireland and would complement the firm’s existing US and Cayman fund offerings, including Saba Capital Income and Opportunities (BRW) and Income and Opportunities II (SABA).

The ETF would allow Saba to consolidate positions in undervalued UK-listed investment companies, a sector where shares currently trade around 14% below net asset value, excluding 3i Group. By targeting these discounts, the ETF could give the firm leverage to influence boards and push for measures that narrow the gap between share price and asset value.

Saba has a history of activist campaigns in this space, including an unsuccessful attempt earlier this year to take control of seven fund boards. The proposed ETF offers a more scalable approach, potentially enabling Saba to deploy capital across multiple trusts without needing to pursue board control individually. Analysts note that while the ETF could help unlock value, not all investment companies may be suitable due to liquidity constraints and bid-ask spreads, and investors should weigh the risks against staying in existing holdings.

The ETF is expected to include holdings from Saba’s existing BRW and SABA funds, such as Schroder UK Mid Cap, BlackRock Smaller Companies, Baillie Gifford UK Growth, Mercantile, SDCL Energy Efficiency Income, RIT Capital Partners, Monks, and Templeton Emerging Markets, among others.