Breakthrough in Closed-End Funds Dispute
A New Era of Cooperation
In a surprise move, BlackRock and Saba Capital Management have reached a landmark agreement, bringing an end to their long-standing dispute over the management of closed-end funds. The world’s largest asset manager, BlackRock, will buy back shares in two of its portfolios, while Saba, a significant shareholder, will drop its demands for sweeping changes to the funds’ management.
A Win-Win Solution
Under the terms of the agreement, BlackRock will purchase 50% of outstanding shares in its BlackRock Innovation and Growth Term Trust and 40% of outstanding shares in Health Sciences Term Trust at a price of 99.5% of each fund’s net asset value. This represents a total of approximately $1.6 billion, a record amount available to investors. In return, Saba has agreed to cease its campaigns calling for new directors and the removal of BlackRock as manager at dozens of its closed-end funds.
Unlocking Value for Investors
Saba’s founder, Boaz Weinstein, hailed the agreement as a “monumental outcome for shareholders.” He believes that by committing to shareholder-friendly initiatives, liquidity events, and governance enhancements, value can be unlocked for all investors. This settlement marks a significant shift in the relationship between shareholders and managers, demonstrating that cooperation can lead to mutually beneficial outcomes.
A Long-Standing Dispute
Weinstein has been a vocal critic of closed-end funds, arguing that they charge high fees and deliver lackluster returns, with limited opportunities for investors to exit. He has been pushing for change, urging shareholders to replace directors and install new managers. The agreement comes seven months after BlackRock shareholders voted to retain the asset manager’s directors and management at several of its closed-end funds.
The Challenge of Closed-End Funds
Closed-end funds, unlike open-end funds, do not issue or redeem new shares, which can result in trading prices that diverge from the value of the securities held by the fund. This gap has been a key area of contention, with Weinstein arguing that it fails to deliver sufficient returns to shareholders.
A Global Crusade
Weinstein’s campaign has not been limited to the US. Late last year, he took his fight to the UK, urging shareholders in seven investment trusts to replace directors and install his hedge fund as the manager. He believes that the current boards have failed to deliver adequate returns to shareholders.
A New Chapter
The agreement between BlackRock and Saba Capital Management marks a significant turning point in the management of closed-end funds. By working together, shareholders and managers can unlock value and create a more equitable investment environment. As Weinstein notes, this settlement demonstrates that cooperation can lead to a “win-win” solution for all parties involved.
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