8-K: XAI Octagon Floating Rate & Alternative Income Term Trust Becomes Perpetual Fund Following Shareholder Approval

Shareholders of XAI Octagon Floating Rate & Alternative Income Term Trust approved a proposal to eliminate the fund's termination date, making it a perpetual fund, and also approved a new sub-advisory agreement.

Summary

• XAI Octagon Floating Rate & Alternative Income Term Trust shareholders voted to amend the trust's declaration, removing the termination date of December 31, 2029, and making it a perpetual fund.
• The trust's name will change to XAI Octagon Floating Rate & Alternative Income Trust, effective February 1, 2024.
• A new sub-advisory agreement with Octagon Credit Investors was also approved, contingent on the acquisition of Octagon's parent company by Generali Investment Holdings.
• The trust's investment objectives, strategies, and fee structure will remain unchanged.
• The new sub-advisory agreement will maintain the same terms and fees as the existing agreement.
• Generali, the acquiring company, is a large global insurance and asset management group with over 500 billion in managed assets.

Sentiment

Score: 8

Explanation: The document conveys a positive sentiment due to the successful shareholder vote, the transition to a perpetual fund, and the continuity of portfolio management. The language used is optimistic and forward-looking.

Positives

• The trust will now operate as a perpetual fund, allowing it to maintain a fully invested portfolio without the need to wind down investments.
• Shareholders can remain invested in the trust without needing to seek a replacement investment due to termination.
• The trust can continue to seek growth and scale opportunities as a perpetual fund.
• The new sub-advisory agreement ensures continuity in portfolio management by Octagon Credit Investors.
• The trust's investment objectives and strategies will remain unchanged, providing stability for investors.

Risks

• The acquisition of Octagon's parent company by Generali is still pending and is expected to close in the first half of 2024.
• The document contains forward-looking statements which are subject to risks and uncertainties, and actual results could differ materially.

Future Outlook

The trust will operate as a perpetual fund, allowing it to maintain a fully invested portfolio and seek growth opportunities. The new sub-advisory agreement will be entered into upon the closing of the acquisition of Octagon's parent company by Generali, which is anticipated to occur during the first half of 2024.

Management Comments

• Greg Dingens, Chair of the Trusts Board, stated that the shareholder vote in favor of the proposals is a signal of support for the Trust and will propel the Trusts further growth.
• Gretchen Lam, Chief Executive Officer of Octagon, expressed gratitude for shareholders' continued faith in Octagon's management of the Trust's portfolio and excitement for the next phase of Octagon's growth.

Industry Context

The move to become a perpetual fund is notable as it is the first of its kind for a listed term trust closed-end fund, potentially setting a precedent for other similar funds. The acquisition of Octagon's parent company by Generali reflects the ongoing consolidation in the asset management industry.

Comparison to Industry Standards

• The transition to a perpetual fund is a unique move for a listed term trust closed-end fund, as most have a set termination date.
• The sub-advisory agreement with Octagon is similar to other arrangements in the industry where specialized investment managers are hired to manage specific portfolios.
• The acquisition of Octagon's parent company by Generali is part of a broader trend of consolidation in the asset management sector, similar to other recent acquisitions such as Franklin Templeton's acquisition of Legg Mason.

Corporate Governance

Stakeholder Impact

• Shareholders will benefit from the trust becoming a perpetual fund, allowing them to remain invested without needing to seek a replacement investment.
• The trust's employees will continue to manage the portfolio under the new sub-advisory agreement.
• The trust's customers will experience no change in investment objectives or strategies.

Next Steps

• The trust will change its name and begin trading under the new name on February 1, 2024.
• The new sub-advisory agreement will be entered into upon the closing of the acquisition of Octagon's parent company by Generali, expected in the first half of 2024.

Key Dates

Keywords

perpetual fund, closed-end fund, sub-advisory agreement, Octagon Credit Investors, Generali Investment Holdings, investment management, shareholder approval, term amendment, XFLT