This Day On The Street
Continue to site
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

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 - Get Report)). 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

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
C $39.86 0.00%
KEF $6.97 0.00%
LM $27.62 0.00%
AAPL $94.02 0.00%
FB $104.07 0.00%


Chart of I:DJI
DOW 16,204.97 -211.61 -1.29%
S&P 500 1,880.05 -35.40 -1.85%
NASDAQ 4,363.1440 -146.4150 -3.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs