Views on the News: Saba's Audacious Strategies Send Shockwaves Through the CEF Landscape
12 September 2023
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THE FACTS
In a seismic move that has set off alarm bells for Closed-End Fund (CEF) managers, Saba Capital Management, L.P. has not only orchestrated a proxy fight to install its nominees on the board of Templeton Global Income Fund (NYSE: GIM), but also assumed the role of investment adviser from Franklin Advisers Inc. This is not déjà vu, but a chilling echo of Saba's previous move against Voya Prime Rate Trust in 2021.
Adding fuel to the fire, Saba is taking another fight to the courtroom against 16 closed-end funds over control share provisions. A judge is set to decide the legal battleground in terms of where jurisdiction should reside -- in federal court or the state of Maryland where these funds are organized.
OUR TAKE
The Saba Shockwave: More than Just Corporate Raids
Saba's successful chess moves in these proxy battles, combined with their legal saber-rattling, sketch out a disconcerting pattern that's more than enough to jolt the industry. Saba's rapid-fire tactics -- be they boardroom coups or legal gambits -- diverge sharply from the sober, long-term vision that guides a well-run CEF. The result? An injection of volatility and governance hiccups that put the long-term health of these funds at risk.
Saba's foray into Voya Prime Rate Trust, and now Templeton Global Income, and their string of ongoing legal challenges serve as stark cautionary tales. Saba is opening a new frontier in their war against traditional CEF governance. Their lawsuits assert that control share provisions violate federal laws, making a bold attempt to nullify forum selection clauses designed to protect these funds. The legal drama adds an unpredictable variable to the already turbulent equation of CEF governance.
The sheer audacity of Saba's actions, now amplified by pending legal battles, tears open a vulnerability in the governance armor of CEFs. This brewing legal tempest accentuates the urgency for managers to fortify their governance structures against these new forms of activist offensives and judicial wrangling.
As we await the outcome in Saba’s court case and watch them settle into their advisory role at GIM, the industry is left on tenterhooks. While Saba may chalk up these moves as strategic victories, their lasting ripple effects on fund governance and shareholder value are making CEF managers everywhere lose sleep. Saba's multifaceted strategies are upending the game board. Cloaked in the guise of "strategy," these actions could just as easily be a speculative gamble, putting the entire sector's governance stability on the line and possibly setting a precedent with alarming implications for the industry.
Morrow Sodali Fund Solutions illuminates the murky waters of governance and activism through its publication, 'Views on the News,' serving as a lighthouse for fund managers navigating these stormy seas.
In a seismic move that has set off alarm bells for Closed-End Fund (CEF) managers, Saba Capital Management, L.P. has not only orchestrated a proxy fight to install its nominees on the board of Templeton Global Income Fund (NYSE: GIM), but also assumed the role of investment adviser from Franklin Advisers Inc. This is not déjà vu, but a chilling echo of Saba's previous move against Voya Prime Rate Trust in 2021.
Adding fuel to the fire, Saba is taking another fight to the courtroom against 16 closed-end funds over control share provisions. A judge is set to decide the legal battleground in terms of where jurisdiction should reside -- in federal court or the state of Maryland where these funds are organized.
OUR TAKE
The Saba Shockwave: More than Just Corporate Raids
Saba's successful chess moves in these proxy battles, combined with their legal saber-rattling, sketch out a disconcerting pattern that's more than enough to jolt the industry. Saba's rapid-fire tactics -- be they boardroom coups or legal gambits -- diverge sharply from the sober, long-term vision that guides a well-run CEF. The result? An injection of volatility and governance hiccups that put the long-term health of these funds at risk.
Saba's foray into Voya Prime Rate Trust, and now Templeton Global Income, and their string of ongoing legal challenges serve as stark cautionary tales. Saba is opening a new frontier in their war against traditional CEF governance. Their lawsuits assert that control share provisions violate federal laws, making a bold attempt to nullify forum selection clauses designed to protect these funds. The legal drama adds an unpredictable variable to the already turbulent equation of CEF governance.
The sheer audacity of Saba's actions, now amplified by pending legal battles, tears open a vulnerability in the governance armor of CEFs. This brewing legal tempest accentuates the urgency for managers to fortify their governance structures against these new forms of activist offensives and judicial wrangling.
As we await the outcome in Saba’s court case and watch them settle into their advisory role at GIM, the industry is left on tenterhooks. While Saba may chalk up these moves as strategic victories, their lasting ripple effects on fund governance and shareholder value are making CEF managers everywhere lose sleep. Saba's multifaceted strategies are upending the game board. Cloaked in the guise of "strategy," these actions could just as easily be a speculative gamble, putting the entire sector's governance stability on the line and possibly setting a precedent with alarming implications for the industry.
Morrow Sodali Fund Solutions illuminates the murky waters of governance and activism through its publication, 'Views on the News,' serving as a lighthouse for fund managers navigating these stormy seas.
Topics
Summary
Game of Russian Roulette: Saba's Audacious Strategies Send Shockwaves Through the CEF Landscape
