Investec view: In our report, Time to man the barricades against an egregious and opportunistic attack, but also for some industry self-reflection, we expressed deep concerns about Saba’s proposals, which in our view, went beyond the “greenmail” that Warren Buffett had previously described as “odious and repugnant”. We highlighted how Saba had failed to provide even basic information on key fundamental issues while, given bewildering corporate governance proposals, we questioned the level of shareholder protection should Saba be successful. Last Friday, shareholders of Edinburgh Worldwide voted decisively against all the requisitioned resolutions. In the initial salvo, not only has Saba lost 7-0, but the magnitude of the defeat in each case, sends a strong message. Despite claims of significant support, the total value of shares, from the “miserable seven” companies, that supported Saba was a rather miserable c.£16m vs. an aggregate market capitalisation of £3.7bn. While Saba has appeared intoxicated on US exceptionalism, the first wave of the campaign has been a spectacular failure, which appears only to have succeeded in galvanising an entire industry against it. Given this backdrop, a rethink was urgently required by Saba, and we didn’t have to wait long to find out what it would be. Earlier last week, Saba launched the second wave, which is greenmail, pure and simple. However, in shifting the focus now to open-ending these trusts, Saba again appears to be missing the point. Spurious rhetoric around “trapped” investors and “long overdue liquidity at NAV” strikes a hollow tone given what we see as Saba’s very clear motives, and conveniently ignores the fact that shareholders have deliberately chosen to buy into these closed-ended vehicles, rather than open-ended equivalents, for good reasons. We strongly believe that investment companies have inherent structural competitive advantages that should underpin superior long-term returns. Critically, this includes the ability to take a long-term approach to portfolio management, without having to worry about cash-flows from new investment/redemptions, which are often at the wrong time in the cycle; and this impact is even more pronounced for smaller, more illiquid investments. In addition, investment companies can employ gearing to enhance returns. It was interesting listening to the Annual Investor Meeting of Pershing Square Holdings (PSH.L, Buy) last week, where Bill Ackman spoke about the “enormous competitive advantage of permanent capital”. Maybe, the venerable Mr Ackman is onto something here. While Saba’s initial ham-fisted attack on the UK closed end industry has been decisively repelled, there is little cause for celebration. Saba has quickly modified its strategy, and the industry must accept Saba is unlikely to be going anywhere, anytime soon. Moreover, while discounts remain stressed, there is a clear risk that this may attract further short-term investors. Accordingly, while we have been encouraged by greater proactivity in the past 18 months, including corporate actions, mergers, increased buybacks, tender offers and changes to fee arrangements, it is critical that the industry accelerates efforts to narrow discounts and dampen discount volatility. There can be no room for any further complacency, and the industry must do whatever it takes to ensure a perfect storm doesn’t become an existential crisis.