One Hedge Fund Manager's Plan For $200 Million Investor Windfall

Saba Capital Management has called on BlackRock to merge its ESG Allocation Trust subsidiary with one its ESG (environmental social governance) mutual funds, in the hope of creating a $200 million windfall for investors.

Saba Capital founder and chief investment officer Boaz Weinstein tweeted on Thursday to urge Rick Rieder, BlackRock’s CIO, to merge BlackRock ESG Allocation Trust ECAT with “one of the many” BlackRock ESG mutual funds.

The Tweet continued: “The discount would evaporate and investors would collectively earn $200,000,000! C'mon Rick, you'll still have 9 trillion AUM and ECAT holders would take comfort knowing that they'd always have a 100% of NAV exit.”

Saba Capital a Big Shareholder in ECAT

But what he didn’t say in the Tweet, was that Saba Capital recently acquired a further 404,013 shares in ECAT at $15.17 a share. The shares currently stand at $15.33.

The transaction increased Saba’s total holding in ECAT to 19,025,530 shares, and ECAT now represents 7.5% of Saba Capital’s holdings, with Saba owning 18.6% of ECAT, according to Yahoo Finance data. This would value Saba Capital’s stake at around $291.7M at current market value.

Hungry Hedgers Target Closed-End Funds

BlackRock ESG Capital Allocation Trust is a closed-end fund that invests in income-generating assets and have been popular with cautious investors looking for steady income. However, they are decreasing in popularity and this has been reflected in their share prices.

Activist investors such as Weinstein have been snapping up shares in closed-end funds recently, targeting those where the market capitalization of the fund is less than the value of assets under management, then applying pressure for the fund managers to liquidate the assets and provide gains for investors.

Thus, the call from Weinstein to Rieder to wind up ECAT and distribute the leftovers to shareholders which, as shown above, he is a significant member.

Benzinga emailed Weinstein for further comment.

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