New York activist Saba Capital follows VGI Partners with Pengana buy

afr.com:

Saba Capital has built a 5.02 per cent stake in Pengana International Equities, which is trading at a 16.7 per cent discount to its asset backing, just two weeks after the New Yorker activist investor went substantial at VGI Partners Global Investments.

Russell Pillemer from Pengana Capital. Christopher Pearce

A substantial notice filed on Thursday afternoon shows Saba Capital began buying units in PIE in mid-March and crossing the compulsory disclosure threshold on Tuesday.

Once again, Arnold Bloch Leibler lent its letterhead to the substantial notice. That indicates Saba should start ruffling feathers with the management soon, if it hasn’t already.

Pengana International Equities has a $264 million market capitalisation, and holds an actively managed portfolio of 60 ex-Australia stocks. At the end of May, its biggest holdings were in Alphabet, Amazon and Ametek. The LIC has been run by Harding Loevner, based in the United States, since 2021.

The investment portfolio has underperformed its benchmark heavily, delivering 3.9 per cent annualised returns versus the benchmark’s 11.9 per cent over a three-year period, and 7.5 per cent versus the benchmark’s 11.6 per cent since inception.

Returns have improved in the past year, with the LIC doing 12 per cent to the index’s 13.1 per cent – but it obviously has a long way to go before it can beat the benchmark (or even match it) over a longer holding period. Meanwhile, the units trade on the ASX at a roughly 16.7 per cent discount.

Saba Capital has been paying attention, even though PIE is a minnow compared to the firm’s recent activism targets: BlackRock ESG Capital Allocation Trust and Blackrock Innovation and Growth Trust, Templeton Global Income Fund and Citadel Income Fund.