Saba Fights Against Amundi-Victory CEF Takeover

Victory Capital is poised to be added as the advisor on three closed-end funds that Saba has ownership stakes in.

By David Isenberg|

January 30, 2025

Saba Capital has urged shareholders in three Amundi Pioneer closed-end funds to reject the proposal to allow Victory Capital portfolio managers to run the funds, proxy filings show.

Last July, Amundi acquired a large ownership position in Victory Capital in exchange for Victory taking ownership of the Paris-based firm’s U.S. division.

The deal is contingent on regulatory approval, client consent and Victory Capital shareholder approval on the issuance of new shares, Amundi said at the time.

When the deal was announced, the firms said they expected it would be complete in late 2024 or early 2025. The firms have not announced that the deal has closed.

Saba, however, wants shareholders to reject the proposal to add Victory as the advisor for the $283 million Pioneer Municipal High Income Fund, $274 million Pioneer Municipal Income Advantage Fund and $247 million Pioneer Municipal High Income Opportunities Fund.

“Saba opposes the reorganization because Saba believes shareholders of the fund should be given the opportunity to exit the fund at net asset value (“NAV”), for example by the fund agreeing to buy back their shares at NAV,” the activist investor wrote in a proxy solicitation letter sent to shareholders on Tuesday. “Saba urges all shareholders who want the option to exit the fund at NAV to express this desire by voting to oppose the reorganization, which currently does not provide shareholders with any such option.”

At least three-quarters of shares must vote to allow Victory to become the fund managers, the solicitation noted. Abstaining from voting counts as voting against Saba’s proposal, the filing says.

Amundi and Saba spokespeople declined to comment.

Saba owns 17.95% of the Municipal High Income Fund, 15.49% of the Municipal High Income Advantage Fund and 11.75% of the Municipal High Income Opportunities Fund, filings show.

Saba first bought shares in each fund in early 2023.

If the activist investor’s proxy campaign is successful, the closed-end funds could dissolve their investment management agreement for 150 days so Victory could round up enough votes to secure its management, according to a person familiar with the closed-end fund activist process who wished to remain anonymous due to business conflicts.

After 150 days, Victory would begin managing the closed-end funds, the source said. However, they could not begin to charge management fees until the matter was resolved.

A Saba victory is unlikely to undo the overall $104 billion Amundi-Victory deal, the source familiar with the closed-end fund activist process said. “They’re not going to have the tail wag the dog,” the source said.

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In recent years, Saba has filed lawsuits, engaged in litigation and proxy battles, and attempted to take over the boards of several registered closed-end funds.

Saba could use the votes to try to extract reduced fees, waivers, fund caps or a liquidity event like a tender offer of 25% of the shares, the anonymous source said.

In the 12 months ended Nov. 30, each of the three Amundi Pioneer funds made 12 distributions to shareholders at rates ranging from 2.75 to 5 basis points per share, filings show.

Because Saba owns over 10% of each fund, they are subject to short-swing profits, said Laura Bissell, senior managing director at Okapi Partners. If they want a discount, one of the only ways is to get out through a large tender offer, she said.

“[T]hey aren’t long-term [closed-end-fund] investors,” she wrote in an email. “It’s the same old game – they want to get the difference between NAV and market price paid to them without regard for the other shareholders.”

For example, in August 2016, Saba tried to use the shareholder resolution process to extract a tender offer from a $433 million Franklin Templeton closed-end fund. Saba used its nearly 15% stake in the Franklin fund to petition for a vote for a tender or else liquidate or convert the fund to an open-end fund. Franklin tried unsuccessfully to have the Securities and Exchange Commission prevent the shareholder proposal.

In December, Saba successfully pressured First Trust to convert a closed-end fund into an ETF after filing a shareholder resolution to receive a concession on the closed-end fund’s price and net asset value discount, or else convert. First Trust said the conversion was for several business reasons unrelated to Saba.

How Saba approaches each closed-end fund depends on the terms of each closed-end fund’s charter, Bissell said.

The Investment Company Institute has called on the SEC to cut proxy voting requirements for certain registered funds as a way to protect them from activists like Saba.

The Municipal High Income Fund launched in July 2003, the Municipal High Income Advantage Fund debuted in October 2003, and the Municipal High Income Opportunities Fund rolled out in August 2021, filings show.