Neuberger Berman, Saba Capital Disagree On Definition Of ‘Winning’

One thing is clear: Hedge fund Saba Capital Management’s slate of candidate for the board of a Neuberger Berman closed-end fund were not elected. Saba says this. Neuberger Berman says this. How they say it is different.

Neuberger Berman says Saba’s proposals were “resoundingly rejected.” This is an interesting choice of phrase, insofar as one of the three proposals—calling for a share buyback—was approved (Neuberger has graciously agreed to “consider” such a move following the non-binding proposal); the proposal to fire Neuberger as the fund’s manager, by Neuberger’s own count, got 2.6 million more votes in favor than opposed, and each of Saba’s three nominees received 2 million more votes than any of Neuberger’s nominees; and the only reason the latter two efforts failed were due to supermajoritarian voting rules that would have required Saba to win 90% of the votes cast, on account of the fact that more than 8 million shares weren’t voted at all. Neuberger justified its statement by noting that fund shareholders—those that bothered to vote, anyway—“rejected Saba’s proposals by greater than 2 to 1 margins,” which is a strange thing to say about an election in which your side received significantly fewer votes than the other side. But that’s only because those of you uninitiated in the Trumpian ways of counting the votes of closed-end fund investors are probably taking into account the 3.8 million shares voted by Saba and its “followers,” which apparently don’t count for rhetorical purposes in a poll in which it had no shot thanks to rules which Neuberger say are laid down by the Investment Company Act of 1940 but which Saba says puts the fund at risk of falling out of compliance with the very same law. No wonder this fund is trading at a discount.

Anyway, suffice it to say that Saba is not at all amused by the way Neuberger is portraying an election that it won approximately 60% of the votes cast.

“Although Saba received 50% more votes for its nominees than Neuberger did for their nominees, because of the high election standard implemented by the Fund, neither slate of directors were elected,” he said in an email. “Any statement saying that Neuberger won the election of directors is categorically false.”

Is that the end of it? Is it hell. Saba is taking a page from another of its closed-end fund adversaries, BlackRock, whose law firm suggested the SEC have a look at Saba’s closed-end fund campaigns.