BlackRock, a leader in the passive-investing revolution, is facing a challenge from activist fund Saba Capital, marking a departure from its usual role as a disruptor in the financial world. Saba has set its sights on ten of BlackRock’s closed-end funds, which are currently trading at a substantial discount to the value of their underlying assets. Unlike mutual and exchange-traded funds, closed-end funds do not offer new shares to incoming investors, allowing their share prices to deviate significantly from the true value of their portfolios.
Boaz Weinstein, the founder of Saba Capital, is calling on BlackRock’s funds to initiate share buybacks to allow investors to exit at the full value of their assets. He believes that this move could unlock approximately $1.4 billion in value for shareholders. In addition to advocating for share buybacks, Saba is also pushing for changes to the funds’ boards by promoting a slate of nominees to represent shareholders at upcoming meetings in June. These nominees will work to negotiate lower fees for investors.
This battle between BlackRock and Saba Capital highlights the growing trend of activist investors targeting asset managers to unlock value for shareholders. While BlackRock has historically been at the forefront of passive investing, it now finds itself defending its closed-end funds against calls for reform from Saba Capital. The outcome of this conflict could have significant implications for both BlackRock and the broader asset management industry.
At the heart of the dispute is the disparity between the market value of BlackRock’s closed-end funds and the true value of their underlying assets. By trading at a discount, these funds are potentially missing out on billions of dollars in value that could be returned to investors through share buybacks. Saba Capital’s campaign for change is aimed at addressing this discrepancy and ensuring that shareholders receive fair value for their investments.
BlackRock, for its part, must now navigate the demands of Saba Capital while also considering the best course of action for its closed-end funds. As a leading asset manager with a reputation for innovation and long-term value creation, BlackRock faces a critical decision regarding how to respond to Saba’s activist campaign. The outcome of this conflict could have far-reaching implications for the future of BlackRock’s closed-end funds and its relationship with shareholders.
In conclusion, the battle between BlackRock and Saba Capital over the future of BlackRock’s closed-end funds highlights the growing influence of activist investors in the asset management industry. As one of the leaders in passive investing, BlackRock is facing a new challenge in defending its funds against calls for reform from Saba Capital. The outcome of this conflict will not only impact the value of BlackRock’s closed-end funds but could also have broader implications for the industry as a whole. Ultimately, how BlackRock responds to Saba’s demands will shape the future of its relationship with shareholders and its position in the evolving landscape of asset management.
