Proxy Battles and Governance Revolutions: Why Saba Capital's Fight at BlackRock and ASA Gold Matters for Investors

Corporate governance is rarely the sexiest topic in investing, but its consequences can be devastating. Nowhere is this clearer than in the closed-end fund (CEF) sector, where entrenched boards, poor performance, and shareholder disenfranchisement are fueling a wave of activism. Saba Capital's high-stakes proxy battles against BlackRock and ASA Gold & Precious Metals highlight both the risks of complacent management and the growing power of shareholder activism to drive reform.

The BlackRock Proxy War: Governance Failures and ISS's Call to Arms

BlackRock, the world's largest asset manager, faces unprecedented scrutiny from its own funds. Over a dozen of its closed-end funds, including BIGZ, ECAT, and BSTZ, have seen their shares trade at steep discounts to net asset value (NAV), a red flag signaling investor distrust. Institutional Shareholder Services (ISS) has thrown its weight behind Saba Capital's nominees for these funds, citing “serious governance failures” that demand immediate intervention.

The stakes are high. ISS flagged BIGZ for its 65% underperformance versus peers and a board that has “entrenched itself against change.” Saba's nominees, including former national security officials like Alexander Vindman, aim to dismantle classified boards and terminate BlackRock's management agreements for six underperforming funds. For BSTZ, ISS highlighted that distributions—supposedly from investment returns—are entirely sourced from return of capital, a practice that erodes long-term value.

ASA Gold: Poison Pills and the NAV Discount Crisis

ASA Gold, advised by Merk Investments, is another battleground. Its shares trade at a NAV discount in the worst decile of CEFs, yet its board insists it has “no duty” to address this. ISS rebuked ASA's adoption of a poison pill—a defensive tactic to block shareholders—and endorsed Saba's nominees, Ketu Desai and Paul Kazarian, who aim to hold Merk accountable for the fund's stagnation.

The disconnect between ASA's stock price and NAV underscores a broader problem: CEFs with poor governance often see discounts widen as investors lose faith. For shareholders, this means permanent value destruction unless governance reforms occur.

Why This Matters for Investors

Closed-end funds are inherently less liquid than ETFs, making governance health a critical factor. Investors in these vehicles are doubly vulnerable: they face both market risks and the risk of mismanagement. Saba's push for independent oversight and NAV discount remedies could set a precedent for CEFs to prioritize shareholders over management convenience.

The urgency is clear. ISS's recommendations signal that major institutional investors are backing Saba's nominees, but individual shareholders must also vote. For the BlackRock funds, this means using the GOLD Proxy Card to vote FOR Saba's nominees and WITHHOLD for specified incumbents. For ASA, the April 2024 annual meeting vote is critical.

Investment Advice: Act Now or Risk Irrelevance

1. Vote Immediately: Shareholders in the affected BlackRock funds and ASA should follow ISS's lead. Procrastination could lock in underperformance.
2. Scrutinize Governance: When evaluating CEFs, prioritize funds with independent boards and clear accountability mechanisms. Avoid those with chronic NAV discounts and defensive tactics like poison pills.
3. Monitor the Outcomes: A Saba victory could spur broader activism in the CEF sector. Investors should watch for similar battles at other funds and adjust portfolios accordingly.

Conclusion: The Governance Tipping Point

Saba's campaigns are not just about board seats—they're about redefining what accountability means in asset management. With ISS's imprimatur, the message is clear: shareholders will no longer tolerate boards that prioritize entrenchment over value. For investors, the choice is simple: support reform, or pay the price of stagnation.

For more details, visit www.HeyBlackRock.com to access proxy materials and voting instructions.

This article is for informational purposes only. Past performance does not guarantee future results. Investors should conduct their own due diligence.