The UK-listed investment trust Middlefield Canadian Income MCT has announced plans to change its legal structure into an exchange-traded fund following pressure from Saba Capital Management.
This is the first UK investment trust to announce a switch to an ETF wrapper following pressure from Saba Capital, the US activist investor which has been engaged in a public push to address liquidity and discount issues in the industry. Earlier this year, Saba Capital targeted seven trusts for control over the investment companies. Shareholders in the targeted vehicles turned out in large numbers to vote against the proposals across January and February.
The management company Middlefield revealed that subject to shareholder and regulatory approval, the ETF will be established by August 2025 and listed on the London Stock Exchange in the form of an authorized UCITS ETF. The trust will then be wound down.
Investors will get the option between exchanging their MCT holdings for ETF shares or participating in an uncapped cash exit at net asset value (NAV) per share—or receiving a combination of both ETF shares and cash.
The ETF will be managed by Middlefield Limited, which is being advised by HANetf on the structure and establishment of the product. The holdings will be aligned with the trust’s existing investment objective and policy, which is to provide exposure to high quality, Canadian and US large capitalization businesses focusing on high levels of stable and increasing income.
Middlefield said that Saba has publicly expressed its support for enhanced liquidity options and, consistent with its earlier requisition, has indicated that it would vote in favor of the transaction at any general meeting of shareholders.
Key Morningstar Metrics for Middlefield Canadian Income MCT
- Star Rating: ★
- Morningstar Category: Canada Equity
- Ongoing Charge: 1.30%
Trust Is Addressing Liquidity Issues
By transitioning to an ETF, the trust’s management company said it is intending to create a cost-effective vehicle positioned to grow and benefit from a tight bid-offer spread (the gap between the price an investor buys and sells a fund), a total expense ratio (TER) lower than the company’s current TER, and a share price that trades close to or at the NAV per share.
Michael Phair, the chair of Middlefield Canadian Income, said that the board continues to have strong conviction in the company’s investment proposition and its ability to deliver a high level of income and long-term capital growth.
“However, the board has listened to feedback from shareholders and recognizes that the constrained liquidity and persistent discount to NAV remain impediments to new and further investment.”
The trust currently holds 30 stocks, of which Enbridge ENB, Royal Bank of Canada RY and Tourmaline Oil Corp TOU are the biggest three holdings. In 2024, the fund’s price grew 20.59%, however, its average share price discount to NAV for the year was 16%.
Middlefield Has Experience With ETF Conversion
The company received a requisition notice from Saba on Feb. 13, 2025, proposing the change in structure, which stated that the ETF would be a “substantially similar strategy” and managed by the existing company and managers, Dean Orrico and Rob Lauzon.
After “constructive” discussions, Saba agreed to withdraw the requisition notice for a period of 60 days to enable the company and its advisors to formulate proposals to shareholders.
The board then concluded that the ETF would address the trust’s issues with limited liquidity and the share price discount to NAV.
Middlefield said that over the past 10 years, it has successfully rolled several of its Canadian closed-end funds into exchange-traded funds listed on the Toronto Stock Exchange.
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