What’s going on here?
Saba Capital Management is taking BlackRock to court over election rules they claim unfairly benefit BlackRock’s chosen trustees.
What does this mean?
The clash between Saba and BlackRock centers on several closed-end investment funds managed by BlackRock. Saba argues that the trustee election rules cement BlackRock’s control. US District Judge Margaret Garnett recently declined to block a trustee election under these rules, saying Saba failed to show irreparable harm. Still, she allowed the lawsuit to go forward, recognizing the strength of Saba’s legal points. The 2nd US Circuit Court of Appeals has already ordered 11 BlackRock funds to rescind specific bylaws challenged by Saba, affirming the trial court’s decisions.
Why should I care?
For markets: Proxy battles heating up.
This legal battle could reshape the governance of BlackRock’s funds and potentially unlock $1.4 billion by reducing the discount to net asset value (NAV). Investors should watch for upcoming shareholder votes, including a pivotal trustee election, that will determine the future management of these funds. Proxy advisory firms like Glass Lewis and ISS have given conflicting advice to shareholders, highlighting the contentious nature of this dispute.
The bigger picture: Legal precedents at stake.
This case has wider implications for how major firms like BlackRock manage trustee elections and respond to activist investors. The lawsuit’s outcome might set significant legal precedents regarding federal election laws and corporate governance, influencing future fund management power struggles. It’s a stark reminder of the ongoing tensions between activist hedge funds and established financial institutions.
