Edinburgh-based investment giant Aberdeen Group confirmed on Monday it paid an undisclosed fee to controversial activist New York hedge fund Saba Capital Management to facilitate an agreement for three years which prevents Saba from agitating for change at numerous investment trusts managed by Aberdeen.

The terms of the agreement remain confidential.

In April, the chair of Baillie Gifford-managed £860 million Edinburgh Worldwide Investment Trust plc (EWIT)  warned that the UK’s entire investment trust sector is at risk from activists after Saba Capital succeeded in replacing the entire board at EWIT.

Aberdeen expects the payment to Saba to be capitalised as an “intangible asset” and amortised over the period of the three-year standstill agreement with Saba.

“The transaction was reached through a negotiated process, reflects a commercially sensible resolution in a complex situation and achieves a standstill in Saba’s activities in relation to investments trusts who have signed up to this agreement,” said Aberdeen.

“Importantly, investment trust shareholders are not paying for the standstill.

“We believe this provides a pragmatic and constructive way forward and supports the stability of the trusts who sign up to the standstill.”

Aberdeen’s agreement with Saba is thought to be similar in structure to a deal Saba agreed with BlackRock earlier this year that covers some BlackRock funds.

The Aberdeen-Saba arrangement is understood to be the first such agreement between an activist and a UK-based fund manager.

On May 7, Aberdeen Investments said it had been proposed as the investment manager of the £1.5 billion Herald Investment Trust plc (HRI) — with HRI shareholder Saba Capital signing a three-year “standstill agreement.”

Saba’s agreement with HRI and Aberdeen commited the hedge fund “not to exercise any voting rights on any resolutions proposed at any annual or other general meeting of HRI against the recommendation of the board of HRI.”

Also on May 7, it emerged that Aberdeen Investments and Saba also reached an agreement relating to up to a further eight investment trusts in Aberdeen’s range, with combined assets under management of £12.5 billion “who will have the option to participate in a similar standstill arrangement should their independent boards decide to do so.”

On Monday, seven investment trusts said they had entered into three-year standstill agreements with Aberdeen and Saba. The trusts are: Dunedin Income Growth Investment Trust, Aberdeen Asia Focus, Aberdeen New India Investment Trust, Aberdeen Asian Income Fund, Aberdeen Equity Income Trust, Aberdeen UK Smaller Companies Growth Trust and Murray International Trust.