Closed End Fund Association Releases Podcast Covering Activism, Shareholder Voting

In a May podcast from the Closed-End Fund Association (CEFA), Christopher Hayden (Chief Operating Officer, U.S. at Georgeson LLC) and Dennis Emanuel (Managing Director at Chatsworth Securities LLC) discussed the importance of shareholder voting when a fund is faced with an activist threat. The presenters emphasized the importance of shareholder participation, particularly because Closed-End Funds (CEFs) are required to hold an annual shareholder meeting. Many times, funds have a difficult time establishing a quorum which is costly and prevents business from moving forward at the meeting. It also presents an opportunity for activists to seize the advantage at meetings and advance their agenda rather than the agenda of a true majority of shareholders. Activists can push for corporate actions such as “a tender offer, conversion to an open-end fund, and a liquidation.” Each of these has a separate impact on the remainder of the shareholders. Additionally, some activists will push for director candidates of their own to replace current members of the fund’s board. In any of these cases, as Dennis noted the activist is, “opportunistically acquiring assets and at extremely attractive levels, and mostly for their own benefit because now they'll own the management contract and the fees that go along with it, and they can all do this with very minimal effort.” 

Click here to listen to the CEFA podcast “Activism & the Importance of Shareholder Voting.”