DEFA14A: BlackRock Defends Closed-End Funds Against Saba Capital's Proposals in Proxy Fight

BlackRock is urging shareholders to vote against Saba Capital's proposals to install its own nominees and terminate BlackRock's investment management agreements for certain closed-end funds.

Summary

• BlackRock is engaged in a proxy fight with Saba Capital Management, a hedge fund seeking to install its own board nominees and potentially replace BlackRock as the investment manager for several closed-end funds (CEFs).
• BlackRock is actively defending its management of these funds, highlighting its long-term track record and actions taken to address CEF discounts, such as share repurchases and distribution increases.
• Saba is criticized for allegedly seeking short-term profits at the expense of long-term shareholder value, with BlackRock emphasizing its commitment to delivering consistent income and long-term value for CEF investors.
• BlackRock has repurchased $1.3 billion in shares to date, resulting in more than $200 million in gains to shareholders.
• BlackRock generated $3.6 billion in tangible gains in 2023 alone and expects 2024 fund payouts of $3.2 billion.
• BlackRock announced distribution increases across muni CEFs and for certain term CEFs in May 2024, as well as fee waivers and a one-time $2 million management fee waiver for all muni CEFs.
• Discount management programs (DMPs) have been implemented for 14 of BlackRock's CEFs.

Sentiment

Score: 7

Explanation: The document presents a defensive but confident tone, highlighting BlackRock's actions to deliver value and defend against what it portrays as a self-serving activist.

Positives

• BlackRock has a 35+ year history managing CEFs and an established track record of delivering long-term value.
• BlackRock has taken steps to narrow the discount of these Funds through share repurchases, distribution increases and implementation of discount management programs (DMPs).
• BlackRock has repurchased $1.3 billion in shares, generating significant gains to shareholders through NAV accretion.
• BlackRock generated $3.6 billion in tangible gains in 2023 alone.
• BlackRock expects 2024 fund payouts of $3.2 billion.
• BlackRock announced distribution increases across muni CEFs and for certain term CEFs in May 2024.
• BlackRock announced a one-time $2 million management fee waiver for all muni CEFs in May 2024.

Negatives

• BlackRock CEFs sometimes trade at a discount to net asset value.
• Saba Capital Management is attempting to install its own handpicked nominees and potentially fire BlackRock as investment manager of one or more CEFs.
• Saba has never launched a CEFjust taken them overand has exposed their funds shareholders to riskier assets, like SPACs, or forced liquidity events, potentially leaving them with a fund that no longer serves their long-term financial goals.
• Both funds Saba took over have traded at discounts and have underperformed under Sabas management.

Risks

• The proxy fight with Saba Capital could lead to changes in the management and investment strategy of the targeted BlackRock CEFs.
• Saba's proposals to terminate investment management agreements could disrupt the funds' operations and potentially impact shareholder value.
• Unwinding illiquid assets suddenly could cause a fund to sell assets at lower prices and potentially incur tax consequences.
• Activist hedge funds like Saba may prioritize short-term profits over the long-term interests of retail shareholders.

Future Outlook

BlackRock is focused on helping shareholders reach their financial goals and is taking steps to narrow the discount of these Funds through share repurchases, distribution increases and implementation of discount management programs (DMPs).

Management Comments

• BlackRock and your Funds Board regularly act to address closed-end fund discounts.
• We've bought back $1.3B in shares to date, resulting in more than $200M in gains to shareholders.
• We generated $3.6B in tangible gains in 2023 alone; we expect 2024 fund payouts of $3.2B to help you meet your financial goals.
• BlackRock and your Funds Board have taken numerous shareholder-friendly actions to narrow discounts, raise distributions, and deliver value for all shareholders.
• We believe Saba is trying to take advantage of closed-end fund market conditions to make a quick profit at the expense of its fellow shareholders.
• BlackRock and your Funds Board have consistently worked to improve performance and reduce discounts in recent years.

Industry Context

This proxy fight highlights the increasing activism targeting closed-end funds, with hedge funds seeking to exploit discounts to net asset value and influence fund management.

Comparison to Industry Standards

• BlackRock emphasizes its 35+ year history managing CEFs, contrasting it with Saba's lack of experience in launching and managing CEFs.
• The document claims that funds taken over by Saba have traded at discounts and have underperformed under Sabas management.
• BlackRock highlights its actions to narrow discounts, such as share repurchases and distribution increases, which are common strategies in the CEF industry.
• The document references Morningstar's Outstanding Portfolio Manager of the Year award given to Rick Rieder in 2023, showcasing BlackRock's portfolio management expertise.

Stakeholder Impact

• The outcome of the proxy fight could impact shareholders through changes in fund management, investment strategy, and potential returns.
• Employees of BlackRock's CEF management team could be affected if Saba's proposals to terminate investment management agreements are successful.

Next Steps

• Shareholders are urged to vote using the WHITE proxy card.
• Shareholders are encouraged to contact Georgeson LLC with any questions about the proposals to be voted.

Key Dates

Keywords

BlackRock, Saba Capital, Closed-End Funds, Proxy Fight, Shareholder Value, Investment Management, Board Nominees, CEF Discounts, Share Repurchases, Distribution Increases