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

Saba Capital Management is attempting to install its own board nominees and terminate BlackRock as the manager of BlackRock Capital Allocation Term Trust (BCAT) at the upcoming annual meeting.

Summary

• BlackRock Capital Allocation Term Trust (BCAT) is facing a proxy fight from Saba Capital Management, an activist hedge fund.
• Saba is seeking to replace the current board with its own nominees and terminate BlackRock as the fund's manager.
• BlackRock is urging shareholders to vote against Saba's proposal using the WHITE proxy card.
• BlackRock highlights BCAT's outperformance of its peer group in 2023, with a total shareholder return of 19.3% compared to the peer median of 6.5%.
• The fund has added over $13 million in value since inception through share buybacks.
• BlackRock warns that supporting Saba could lead to wider discounts, higher fees, and riskier investment strategies.
• The annual meeting is scheduled for June 26.

Sentiment

Score: 6

Explanation: The document is primarily a defense against a proxy fight, highlighting positive performance metrics while warning of potential risks associated with the activist investor's involvement. The sentiment is neutral to slightly positive, focusing on preserving the current management and strategy.

Positives

• BCAT's total shareholder return of 19.3% in 2023 significantly outperformed its peer median of 6.5%.
• The fund has implemented share buybacks, adding over $13 million in value since inception.
• Rick Rieder, the portfolio manager, received Morningstar's Outstanding Portfolio Manager of the Year award in 2023.
• BCAT has a distribution increase since inception, while peers decreased.

Negatives

• BCAT is facing a proxy fight from Saba Capital Management, which could disrupt the fund's management and investment strategy.
• Saba's involvement has been associated with wider discounts to net asset value in other funds it has commandeered.
• Saba has been accused of raising costs, including hidden management fees, in funds it manages.
• Saba's strategies may involve riskier investments like SPACs and crypto.

Risks

• Supporting Saba could lead to wider discounts to net asset value for BCAT shares.
• Saba's management could result in higher fees for the fund's shareholders.
• The fund's investment strategy could become riskier under Saba's control, potentially impacting returns.
• There is a risk that the consistent monthly income provided by BCAT could be jeopardized if Saba prevails.

Future Outlook

BlackRock is urging shareholders to vote against Saba's proposal to maintain the current management and investment strategy.

Management Comments

• BlackRock is fighting for YOU.
• Your vote has never mattered more.
• Your Board and management team put YOU first.

Industry Context

Activist investors targeting closed-end funds is a known strategy to unlock value or change fund strategies. Saba Capital Management is a well-known player in this space. The outcome of this proxy fight could set a precedent for other similar situations in the closed-end fund industry.

Comparison to Industry Standards

• BCAT's 19.3% total shareholder return in 2023 significantly outperformed its peer median of 6.5%.
• The peer set includes BCAT, GLV, GLO, BXSY, FT, RCG, RIV, OPP and SPE; PDX included in the peer set starting 1/1/2024.

Stakeholder Impact

• Shareholders are directly impacted by the outcome of the proxy vote, as it will determine the fund's management and investment strategy.
• The fund's performance and distribution policy could be affected by the outcome of the vote.
• BlackRock's reputation as a fund manager is at stake.

Next Steps

• Shareholders need to vote on the WHITE proxy card before the annual meeting on June 26.
• Shareholders are advised to disregard any GOLD proxy cards received from Saba Capital.

Key Dates

Keywords

BlackRock Capital Allocation Term Trust, BCAT, Saba Capital Management, proxy fight, shareholder return, investment management agreement, board nominees, closed-end fund, share buybacks, discount, fees, risk, Rick Rieder