BlackRock and Saba Capital: A New Dawn for Closed-End Funds

In a significant development for the closed-end fund (CEF) industry, BlackRock, the world's largest asset manager, and Saba Capital Management, a prominent activist hedge fund, have reached a settlement in their long-standing battle over the performance and governance of two of BlackRock's CEFs. The agreement, announced on January 22, 2025, signals a new era of cooperation and shareholder-friendly initiatives in the CEF landscape.

The settlement, brokered after months of intense negotiations, revolves around BlackRock's tender offers for shares in the BlackRock Innovation and Growth Term Trust (BIGZ) and BlackRock Health Sciences Term Trust (BMEZ). The asset manager will repurchase 50% of outstanding shares in BIGZ and 40% in BMEZ at a price of 99.5% of each fund's net asset value (NAV). In return, Saba Capital has agreed to withdraw its shareholder proposals and align its voting with the fund boards over the next three years.

The agreement between BlackRock and Saba Capital is a testament to the power of constructive dialogue and compromise. By addressing Saba's concerns and committing to shareholder-friendly initiatives, BlackRock has demonstrated its commitment to enhancing the performance and governance of its CEFs. The tender offers, in particular, provide liquidity and the potential for capital appreciation, benefiting shareholders and narrowing the discounts to NAV.

The settlement also highlights the growing influence of activist investors in reshaping the CEF landscape. Saba Capital's involvement in the negotiations and its eventual alignment with the fund boards underscore the importance of engaging with shareholders and addressing their concerns. Other asset managers can learn from this example by proactively addressing underperformance and governance issues, fostering greater alignment between fund managers, shareholders, and activist investors.



The agreement between BlackRock and Saba Capital has significant implications for the broader CEF industry. By setting a precedent for shareholder engagement and alignment, the settlement encourages other asset managers to adopt similar measures, fostering a more collaborative and shareholder-friendly environment. This, in turn, could lead to improved performance and liquidity in CEFs, attracting more investors and enhancing the appeal of these investment vehicles.

In conclusion, the settlement between BlackRock and Saba Capital Management marks a new dawn for closed-end funds. By addressing shareholder concerns, enhancing governance, and fostering a more collaborative environment, the agreement sets a precedent for the CEF industry and offers valuable lessons for other asset managers. As the CEF landscape continues to evolve, investors can expect to see more shareholder-friendly initiatives and improved performance from these investment vehicles.