This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Closed-End Salomon Brothers Fund Attracts Proxy War

Elliott Associates, a $5.2 billion hedge fund, is leading a proxy fight against the closed-end Salomon Brothers Fund (SBF) managed by Citigroup Asset Management.

As is often the case with closed-end funds trading at a deep discount to net asset value, the activists' agenda is to narrow -- and in this case, to eliminate -- the discount. Right now, the fund is trading at 8.5% below net asset value.

A similar battle took place recently between Sowood Capital Management -- Harvard's investment arm -- and the Korea Equity Fund (KEF), in which Nomura Asset Management, the fund's manager, succeeded in blocking the liquidation of the fund.

This time, the activists have a bargaining chip that may play in their favor.

On Thursday, Elliott filed a proxy indicating that at a special shareholders meeting slated for Oct. 21, it will vote against a management agreement needed to effect the transfer of SBF's assets to Legg Mason (the deal is part of the firm's June asset swap with Citigroup (C)). By blocking the transfer of the SBF assets to Legg Mason, the activists are putting pressure not only on the fund's board but also on Citigroup.

Elliott, one of the oldest U.S. hedge funds, is the largest shareholder in the SBF fund with 5.88 million shares, or 6% of the fund's outstanding shares. In its proxy, it says it is "deeply concerned with the fund's meaningful discount to NAV."

Since 2002, the average discount for SBF has been 14%. Elliott acknowledged a reduction of the discount since the beginning of August. But it attributes the narrowing to the actions of the shareholder activists, not to the fund management.

Elliott isn't alone in the campaign. On Thursday, Karpus Management, a $1.1 billion, Pittsford, N.Y.-based investment manager that holds a 1.50% stake in SBF, filed a Schedule 13D expressing "frustration over the failure of management to adequately address the wide and persistent discount to NAV."

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,959.44 +154.64 0.87%
S&P 500 2,078.54 +7.89 0.38%
NASDAQ 4,781.4240 +16.0440 0.34%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs