| Boaz Weinstein, Saba Capital Management (photo credit: David Paul Morris/Bloomberg) |
Clough Capital Partners is clearly in the cross-hairs of Saba Capital Management, the hedge fund firm headed by Boaz Weinstein. On Monday, Saba launched proxy fights with three separate closed-end mutual funds marketed by Clough, a Boston-based investment firm. In each case Saba is seeking to add several people to the funds’ boards and change the board terms to one year.
These actions are consistent with a larger strategy deployed by Saba for more than a year, in which it has been buying closed-end funds trading at a discount to net asset value (NAV) and then trying to coax the funds to take some sort of measures to narrow or close the discount.
In each of the three cases involving Clough funds, Saba is taking issue with their fees, which it deems to be too high, and the funds’ recent marked underperformance compared with the Standard & Poor’s 500 stock index and the Dow Jones industrial average, insisting that Clough’s management team is “the only person doing well.”
In each of the three cases involving Clough funds, Saba targets the high fees being charged and the fund’s recent way underperformance compared with the S&P 500 and the Dow, insisting that Clough’s management team is “the only person doing well.”
“Your vote for Saba Capital will allow us to fight for lower fees for all shareholders and for better management,” Saba states in each of the three proxy filings, which are similar except for specific facts pertaining to each individual fund. “Through these improvements, we are confident that the fund will trade at a higher price.”
A spokesman for Clough said in an email to Alpha that Saba failed to compare the funds’ performance to a relevant benchmark or to any peer funds, stressing, “The funds’ performance compares quite well to its benchmark and its peers, and year to date, each fund is up over 14%, far outpacing its respective benchmark.”
The spokesman added, “Saba tries to imply Clough is the beneficiary of ALL the fees and expenses Saba refers to in their letter. However, the majority of the expenses referred to by Saba relate to typical operating expenses such as interest on borrowings, interest and dividends on shorts, fund administration, and other normal fund expenses, none of which gets paid to Clough. Saba is trying to position itself as some sort of savior when in actuality Saba’s interests don’t align with long term investors. Its assertions are quite misleading.”
Weinstein declined to comment at this time.
Saba manages several funds. Through April its flagship fund, Saba Capital Offshore Fund, was flat, while through May its Saba Capital CEF Opportunities 1 Onshore, a long-only fund focused on the closed-end fund strategy and launched in late 2015, had gained 14 percent. A hedged version of the strategy, Saba Capital CEF Opportunities 2, had gained 8 percent over the period.
In the case of the Clough Global Equity Fund, Saba points out that its total expense ratio in 2016 was a whopping 4.21 percent. It adds that Clough has generated $112 million in fees and expenses since the fund’s inception, which “come directly from shareholder’s pockets.”
Saba also notes that since the fund’s inception through 2016, it has returned 63 percent to shareholders, including all distributions. Excluding these fees and expenses, the share price would be 60 percent higher, Saba asserts.
Saba also notes that the fund has underperformed the S&P 500 by 84.1 percentage points since its inception. “The board must take these actions and allow all shareholders to sell their investments at its true value; something shareholders haven’t been able to do since 2006,” it adds in the filing.
As for the Clough Global Dividend and Income Fund, Saba says its 2016 expense ratio clocked in at 3.65 percent.
“If you are hesitant to believe the expense ratio is truly this high then please go to Morningstar.com or CEFA.com and you will see what Clough won’t publically acknowledge,” Saba says in the filing.
Saba says that fund has generated $62 million in fees and expenses since inception. It also notes that the fund has returned 86 percent to shareholders, including all distributions, and that excluding these fees and expenses, the share price would be 52 percent higher. Saba adds that for the past ten years, the fund has traded at a 13 percent average discount to NAV.
The third targeted fund is Clough Global Opportunities Fund. Saba says its expense ratio last year was 4.32 percent.
“Clough refuses to display their total fees on their website, will only inform you of fees that have been ‘adjusted’, and tells you that if you want to know the actual expense ratio then you need to call them,” the hedge fund firm states in the proxy.
Saba points out this fund has returned 19 percent to shareholders, including all distributions, while the price would be 61 percent higher excluding these fees and expenses.
