New York-based hedge fund Saba Capital Management has added to its position in the Highland Floating Rate Opportunities Fund (HFRO), purchasing shares worth approximately $166,472. The transaction, disclosed in a recent SEC filing, underscores the firm's ongoing campaign to unlock value in closed-end funds trading at discounts to net asset value.
HFRO, a US-listed closed-end fund investing in senior floating rate loans and other credit instruments, has been a frequent target of Saba Capital. Founder Boaz Weinstein's fund has previously pushed for board changes and liquidity events at several CEFs, arguing that persistent discounts harm long-term shareholders. The latest purchase, though modest in size, signals continued conviction.
For UK investors, the implications are indirect but noteworthy. Closed-end funds are less common in the UK but exist in the form of investment trusts, many of which also trade at discounts. Saba has a track record of agitating for buybacks, tender offers or winding-up votes, which can create short-term price spikes. However, such activism also carries risks, including increased volatility and management distraction.
Analysts at Numis noted that while Saba's tactics have yielded mixed results, the fund's persistence has forced some US boards to adopt more shareholder-friendly policies. 'The playbook is straightforward: buy at a discount, demand change, and profit from the narrowing of that discount,' one analyst commented. 'UK trust investors should watch for similar campaigns closer to home.'
The broader context for HFRO includes a rising interest rate environment, which has boosted the appeal of floating rate instruments. Yet the fund's discount to NAV has remained stubbornly wide, providing an entry point for activists. Saba's latest purchase adds to a stake that already exceeds 5% in several similar vehicles.