DEFA14A: BlackRock Capital Allocation Term Trust Faces Proxy Fight from Saba Capital

BlackRock urges shareholders to vote using the WHITE proxy card to support its board nominees and reject Saba Capital's proposal to terminate BlackRock as the investment advisor.

Summary

• BlackRock is currently engaged in a proxy fight with Saba Capital Management, L.P. regarding the BlackRock Capital Allocation Term Trust (BCAT).
• Saba Capital is attempting to install its own board members and remove BlackRock as the investment advisor.
• BlackRock is urging shareholders to vote FOR its board nominees and AGAINST Saba's proposal.
• BlackRock highlights BCAT's performance, including a 14% return on market price year-to-date in 2024, outperforming 94% of closed-end funds.
• BCAT has bought back over $78 million of shares since inception, adding ~$13 million in value.
• BlackRock emphasizes the experience and stability of its board and investment managers.
• They claim Saba's motives are self-serving and could harm shareholders through loss of income, higher fees, riskier investments, poor performance, and potential liquidation.
• Shareholders are reminded that only the latest dated proxy card will count at the meeting, and to use the WHITE proxy card provided by BlackRock.

Sentiment

Score: 6

Explanation: The document is primarily defensive, aiming to persuade shareholders to reject an activist investor's proposal. While highlighting positive performance metrics, it also expresses concern about potential negative outcomes, resulting in a neutral to slightly positive sentiment.

Positives

• BCAT has delivered a 14% return on market price year-to-date in 2024, outperforming 94% of all closed-end funds.
• BCAT has bought back over $78 million of shares, adding ~$13 million in value since inception.
• The fund has a discount management program involving share repurchases to mitigate discounts.
• BlackRock has been a closed-end fund leader since 1988, demonstrating long-term experience.

Negatives

• Saba Capital is attempting to install its own board members and terminate BlackRock as the investment advisor, creating uncertainty.
• BlackRock claims Saba's motives are self-serving and could harm shareholders.
• There is a risk of potential liquidation, which could result in forced selling at fire sale prices and tax consequences for shareholders.

Risks

• Saba Capital's actions could lead to loss of income, higher fees, riskier investments, and increased volatility.
• There is a risk of poor performance as a closed-end fund manager under Saba's control.
• Liquidation could result in forced selling at fire sale prices and tax consequences for shareholders.
• The market value and net asset value (NAV) of the fund's shares will fluctuate with market conditions.

Future Outlook

BlackRock aims to preserve the fund's stability and consistency of income by retaining its role as investment advisor and maintaining the current board.

Management Comments

• BlackRock believes that Saba's motives conflict with shareholders' best interests.
• The Board unanimously recommends voting FOR the Boards Nominees, who have created value for all shareholders.
• The Board unanimously recommends voting AGAINST Saba's proposal to terminate the investment management agreement with BlackRock.

Industry Context

Activist investors targeting closed-end funds is a known strategy to unlock value or force changes in fund management. Saba Capital is a well-known activist investor in this space.

Comparison to Industry Standards

• The document states that BCAT's 14% return on market price year-to-date in 2024, outperforming 94% of all closed-end funds. This is a strong performance metric compared to its peers.
• Comparable closed-end funds might include those managed by firms like Eaton Vance, Nuveen, or Franklin Templeton, but specific performance comparisons would require further analysis of those funds' returns during the same period.

Stakeholder Impact

• Shareholders face potential changes in fund management and investment strategy.
• Employees of BlackRock could be affected if the investment management agreement is terminated.
• The outcome of the proxy fight could impact the fund's performance and returns for shareholders.

Next Steps

• Shareholders need to vote on the proxy proposals by the date of the Annual Meeting.
• BlackRock will continue to advocate for its board nominees and against Saba Capital's proposal.

Key Dates

Keywords

BlackRock Capital Allocation Term Trust, Saba Capital, proxy fight, board nominees, investment management agreement, share repurchases, closed-end fund, shareholders, BCAT, BlackRock