Last Tuesday, Saba held a webinar attended by a raft of brokers, journalists, directors, and even a few investors – the complete ‘echo-system’ as Saba’s Boaz Weinstein kept calling it – of people interested in its plans for the seven targeted trusts and the rest of the sector.

You can catch up on the details in Michelle McGagh’s story here, so I will not rehash everything except to restate (as I did in the comments) that Weinstein is most definitely not the voice of ‘mom and pop’ investors.

What seemed like a rambling and, at times, passionate defence of Saba’s intentions felt to me to be more of a carefully scripted and choreographed attempt to pull the wool over investors’ eyes.

There could be no greater evidence of this than the claim from his PR team that there were no further questions, when the reality was that many hundreds of questions submitted by the audience went unmentioned.

Here – in no particular order – are 10 that we asked, and we would dearly like to know the answers to:

1. If you are genuinely concerned about the interests of your fellow shareholders, why have you tried to seize complete control of these boards, without engaging with them first? 

In many of our conversations with the boards of the targeted trusts, no one said that Saba gave any inkling of its intentions. Some assumed that it would want a narrower discount and liquidity, and acted accordingly. No investors have told us that Saba canvassed their opinion. This might be why it seems to be coming as a surprise to Saba that there is such resistance to its proposals.

2. Why block the Keystone (KPC ) deal?

If Saba was genuinely acting on behalf of other shareholders, it would surely have backed Keystone’s proposal to offer a choice of cash or a rollover into an open-ended fund. It seems to me as though the only logical reason to block the deal is to try to capture some of that money to boost the fees it earns on its planned fund.

3. What will you do for investors who want to stick with the existing mandate?

A large part of my problem with Saba’s idea is that investors will be dumping a range of strategies (small cap, growth, commodities) close to the bottom of the cycle for those investment approaches. It ought to be offering a way for investors who want to retain their exposure to continue to participate in any market recovery.

4. Your US closed-end funds are at quite chunky discounts of 8.5% and 9.9%. Having failed to keep these narrow, how can shareholders in any of the trusts you have requisitioned have faith that you can keep their discounts narrow? What are you doing to manage the discounts on your own trusts?

5. If you have a compelling alternative proposal, why not present that to the existing board?

This is quite telling. Any board would give serious consideration to an interesting idea, but Saba did not have enough faith in its offering to attempt to IPO a trust or secure a mandate to run one in open competition. Instead, it is trying to impose its strategy by using client’s funds to buy votes in order to capture more assets under management, boosting its revenue.

6. Do you understand that if you buy on a 15% discount and sell on a 15% discount, it has had no real effect on your returns?

This came up in response to a chart of Herald’s (HRI ) discount, which has tended to trade at around 15% for most of the past 20 years. Yes, investors have benefitted from an uplift, thanks to Saba’s aggressive stake building, but in the context of Herald’s long-term track record this relatively small one-off uplift is a blip.

7. If a board ended up being sufficiently independent that it decided you should not be appointed as manager, would you vote the directors off again?

Basically, this is another way of saying that I do not believe that Saba’s boards will ever be really independent.

8. Do you accept that best governance is to have zero management representation on the board?

Corporate governance standards are light years away from where they were when I first started investing in the sector. Let’s not backtrack on this.

9. Would you manage the new vehicle for less than a 1.1% management fee, given the pressure on fees in the investment company space?

I would guess the answer to this is ‘no’, but we will see. Again, I cannot help thinking that if Saba had gone down the IPO route, investors would have rejected the idea on fees grounds alone. It is worth nothing that the overall running costs would be a lot higher than 1.1%.

10. What is the appropriate benchmark for your proposed fund? Will you wind it up if it underperforms over three years?

One lesson from my days running the Advance UK trust was that you can run out of opportunities to narrow discounts. My guess is that if Saba succeeds to any great extent this time round, the next group of targets will take pre-emptive action and Saba might soon find that it has nothing to do, no NAV progression, and client money flowing out the door.

It would be nice to have more concrete information on the trust’s proposed structure and in the absence of that, I cannot see how any rational investor would vote for it.

James Carthew is head of investment company research at QuotedData.

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