Ropes & Gray Attorneys Discuss Interventions to Protect Shareholders in Closed-End Funds

In The News
June 6, 2024

A recent Investment Company Institute (“ICI”) report found that no new closed-end funds (“CEF”) were launched in 2023. Industry experts note that CEF managers view activists who buy large stakes in high-discount CEFs and then demand liquidity as a threat to long-term stakeholders.

Asset management partner Elizabeth Reza and litigation & enforcement partner Rob Skinner spoke with Fund Directions about the topic. “New regulations or legislation that would allow CEFs to continue serving the interests of long-term shareholders is a major priority of the group,” Elizabeth said. “The group is thinking about the benefits of the vehicle - in this case, listed closed-end funds - and in light of those benefits, whether changes are needed in order to preserve the vehicle. That was the primary driver of considerations around the listed closed­end funds."

“In various settings, we often see legislatures amend statutory language when they disagree with the interpretation of the prior language by courts," Rob said. "One response of Congress could be to clarify the language of lS(i) to make clearer that control share provisions are not contrary to lS(i).”