Retail Investors Face 50% Losses as Saba Capital Pressure Ends Green Trust

Thousands of small investors piled into one of London’s best-known green investment vehicles are staring down a barrel of losses exceeding more than 50 percent, after the board of the SDCL Efficiency Income Trust (SEIT) bowed to pressure from a New York activist and abandoned its rescue plan in favor of a regulated wind.

The FTSE 250 trust, which has raised more than £1.1 billion from retail investors since launching in 2018, confirmed today that it has postponed plans to convert itself into a normal operating company and will instead start selling its portfolio of high-performing assets.

SEIT becomes the latest London-listed trust to change course under Saba Capital, the aggressive New York hedge fund run by Boaz Weinstein, who is understood to hold a stake of more than 10 percent. Saba has built up positions in several British investment trusts over the past eighteen months, pushing for board changes and cash to be returned to shareholders.

For an army of private investors who signed up for SEIT’s nine fund raisings between 2018 and 2022, the decision marks a sad end to what once looked like a copper-bottomed road to a green transition. They were attracted by expected yields of 5 percent or more at a time when interest rates were low, and placements were often oversubscribed. Their money went into projects ranging from solar roofs on Tesco supermarkets to electric car charging infrastructure and district heating schemes.

The trust’s fortunes fell sharply when interest rates began to climb, and the market grew skeptical about the prices SEIT placed on its unquoted assets. The shares, issued at £1 or more, closed at 45p yesterday, a punishing 49 per cent discount to the stated net asset value. If the portfolio ends up closing anywhere near recent market prices, the combined hit to shareholders could exceed £500 million.

Mr Tony Roper, Chairman of SEIT, said the board had extensive discussions with wealth managers, trading platforms and other large owners, and said the answer was clear. Many expressed what he described as a “clear preference for funds” over the proposed continuation plan. It is believed that Saba was one of those contacted.

The directors, he said, were “unanimously convinced” that the termination of portfolio management would now benefit shareholders as a whole. Roper acknowledged the pain felt by loyal supporters, saying the board was “well aware of the share price reduction in recent years” and was aware of the frustration and uncertainty it had caused.

Also on the table was delisting the investment trust, maintaining the stock market listing as a general trading company and continuing to use the assets. Roper admitted that, in theory, such a route “could create value significantly above the current share price”, but said it ran the risk of making shareholders unwilling to abandon it.

SDCL, a manager founded and led by energy conservation evangelist Jonathan Maxwell, agreed to what the trust described as reduced termination costs, a nod to sensitivity about what retailers might see as the rewards of failure.

Analysts at Barclays said the presence of activists on the shareholder register made the systematic clarification of the outcome possible all along. In their opinion, this change “provides a clear way of realizing the realization of the value”, although they warned that the system will be extended for a long time and that the prices remain at risk.

There is already a warning data point. SEIT recently sold a bunch of assets for £105 million, a 9 per cent discount to their book value, a reminder that the private infrastructure asset market remains sticky and that further haircuts are possible as the wind picks up speed.

SEIT’s decision comes as part of a wider attack by Saba on the £270 billion trust sector. Edinburgh Worldwide Investment Trust and Impax Environmental Markets are both among tender exits that their boards have argued are necessary to prevent common shareholders from being locked into vehicles heavily controlled by the US fund. Several other trusts have announced buybacks, go ahead votes or strategic reviews in an attempt to fend off Saba.

For SME owners and savers who are encouraged to look at special investment trusts as a low-cost way to finance the energy transition, SEIT’s revelations are a sobering lesson. Yields that look good in a zero-rate world can quickly evaporate when gilts start paying 4 percent, and unlisted infrastructure values ​​that hold up well on paper don’t always come alive when they touch a real buyer. With Saba now part of share registers from Leith Walk to Bishopsgate, many boards may find themselves scrambling to fight, fold or return the checkbook to investors.