CEF Weekly Review: Managers Kick It Up A Notch In Fight With Saba

Market Overview - CEF performance varied, with equity-linked sectors declining while longer-duration, higher-quality sectors like Munis outperformed due to a sharp fall in 10-year Treasury yields, boosting Muni prices [2] - July ended positively with nearly a 3% gain across the CEF space before an early August market hiccup [2] Market Themes - NYSE proposed an amendment to eliminate the requirement for CEFs to hold annual shareholder meetings, which could impact shareholder voting on fund board members [3] - The NYSE argues that existing protections for CEF shareholders under the 1940 Investment Company Act would remain intact, despite concerns about reduced competition and oversight [3] - Saba is actively campaigning against the proposed rule change, emphasizing the importance of regular elections for maintaining competitive pressure on CEFs [3] Fund Performance - Saba's CEFs reported that approximately 39% of distributions for the fiscal year-to-date came from net investment income, with BRW showing net investment income around 5.5% and SABA at 3.3% [4][5] - The relative value analysis indicated that SABA was previously a more attractive option when its discount was about 5% wider than BRW, but this opportunity has since diminished [5] IPO Activity - Bill Ackman withdrew the IPO for Pershing Square USA after significantly downsizing the deal, indicating a lack of interest that hindered the transaction [6] - Ackman's previous assertions about the fund trading at a premium were contradicted by market realities, as only 16% of listed CEFs trade at premiums [6][7] Investment Opportunities - Muni CEFs have shown strong performance amid market drawdowns, attributed to lower long-term rates and high-quality profiles, providing a margin of safety [8] - Specific funds such as conditional tender offer funds (MVF) and (EIM), as well as higher-yielding options like NZF, are highlighted as attractive investment opportunities [8]