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Boaz Weinstein’s Saba Capital has agreed to halt its activist battle against 50 BlackRock funds in exchange for a tender offer at two of them, as the hedge fund wages a broader war against the closed-end fund industry.
In a deal between Saba and the two funds announced on Tuesday, BlackRock’s Innovation and Growth Term Trust and BlackRock’s Health Sciences Term Trust will buy back 50 and 40 per cent respectively of outstanding common shares at a share price equal to 99.5 per cent of their net asset value.
The two funds invest in innovative small and medium-sized companies and in health sciences companies respectively, between them managing $3.5bn.
The buyback agreement comes amid a wider settlement with 48 other BlackRock funds, according to people familiar with the situation, and regulatory filings.
“Our settlement with BlackRock shows that there is a path to a win-win outcome for managers and shareholders,” said Weinstein in a statement on X.
As of January 17, BlackRock’s Health Sciences fund was trading at 91.8 per cent of NAV, while the growth and innovation fund was trading on 90.8 per cent.
As part of the deal, Saba has agreed to withdraw proposals it submitted to the funds, and has agreed to standstill covenants for three years.
Weinstein’s Saba had pushed BlackRock to take action to address yawning discounts between the value of assets held by a number of its closed-end funds and their share prices. These discounts can emerge because closed-end funds do not allow easy redemptions but are publicly traded, allowing selling pressure to create a gap between the value of assets held and the price of shares.
Saba last year put forward candidates for the boards of 10 closed-end funds managed by BlackRock that managed around $10bn in aggregate, arguing that these funds had performed poorly and that Saba would return value to investors. All of those funds voted to retain BlackRock directors.
BlackRock and Saba also reached deals involving 48 other funds, although these did not involve tender offers. Saba agreed to withdraw its shareholder proposals and vote with the funds’ board for three years.
The two sides are still litigating over one remaining fund, the BlackRock ESG Capital Allocation Term Trust, known as ECAT, because Saba is challenging the way directors are elected, which requires an outright majority.
The battle against BlackRock mirrors a similar campaign against UK investment trusts, listed companies that invest in a range of assets but which have also suffered from widening discounts between their share price and the assets they have invested in.
At the end of last year, Weinstein called for seven UK investment trusts to overhaul their boards amid weak performance while drawing attention to the discounts.
The chief executive of asset manager Janus Henderson, whose firm manages two of the seven trusts, hit back at Saba this month, saying the hedge fund just wanted to “take advantage of the management fee”.
But the settlement with two of BlackRock’s funds on Tuesday could offer a glimpse into how the US hedge fund could settle with UK investment trusts including Baillie Gifford US Growth, CQS Natural Resources Growth & Income and Henderson Opportunities.
“We look forward to continuing value-enhancing engagement with other managers in the industry,” added Weinstein in his post on X.
BlackRock declined to comment beyond the formal announcement of the settlements.
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