Covestor manager Dan Plettner seeks to exploit inefficiencies in Closed-End Funds and other under-followed exchange-traded securities across multiple asset categories.
Dan holds SunAmerica Focused Alpha Growth Fund, Inc. (NYSE: FGF) and SunAmerica Focused Alpha Large-Cap Fund, Inc. (NYSE: FGI), two closed-end funds, in his Covestor Core, Well-Intentioned Activism and Long/Shore Opportunistic models. On May 18, following pressure from shareholders, these two CEFs announced they would convert to open-end funds:
[A]fter considering the recommendations of management and all of the surrounding circumstances, each Fund’s Board of Directors (“Board”) has determined that it would be in the best interests of shareholders for each Fund to be converted into an open-end fund…
The Board believes that converting each Fund to an open-end fund would accomplish the goal of allowing shareholders to achieve liquidity for their shares in a manner that is consistent with the interests of all shareholders of each Fund. Regardless of the method chosen by the Board, the Conversion of each Fund will require shareholder approval.
In response, the two CEFs jumped for the day on May 18: FGF closed up 4% to $20.60 and FGI moved up 5% to $19 (Yahoo Finance).
Dan had commented on these two holdings in this recent post:
I own FGI and FGF shares only because I believe the shareholder base will escape captivity… I do not think it matters how foolish SunAmerica’s boards assume their shareholders to be. Not here… There are lots of smart shareholders… In my estimation, the inmates are escaping the captive walls of FGI and FGF. Still, the boards are reluctant to grasp the reality of the situation. With every passing day the shares are increasingly in the hands of institutional investors. The only thing current boards might do is delay the inevitable, further adding to the coffers of their lawyers tasked with the same priorities that existed long ago. I see the boards’ choice to oppose the proposals without offering an open-ended alternative as only their latest foolish choice.
Source:
“SunAmerica Closed-End Funds Announce Intention To Convert To Open-End Funds” SunAmerica Press Release, 5/18. https://www.thestreet.com/story/11123406/1/sunamerica-closed-end-funds-announce-intention-to-convert-to-open-end-funds.html
