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Karpus Investment Management sent a letter to the board of the ACM Managed Income Fund (AMF) last week in which they proposed merging AMF into the ACM Income Fund (NYSE:ACG). Karpus believes that the merged fund would trade at a lower discount than AMF currently trades at. This seems reasonable since ACG, which trades at a small discount, is a much bigger fund than AMF, and therefore I wouldn't expect ACG's discount to significantly increase due to a merger.

The interesting thing about this situation is that while Karpus appears to be the largest shareholder in AMF at nearly 14%, Phillip Goldstein's Bulldog Investors owned over 9.5% of the fund as of this filing in June. Both of these shareholders have shown in the past that they do not accept persistently large discounts, so if the board does not take any action and the discount does not decrease on its own, I wouldn't be surprised to see a proxy fight someday. Since these shareholders combined own such a high percentage of the fund, they could be formidable opponents to the board if a proxy fight does break out.

AMF-ACG 1-yr comparison chart:

AMF-ACG 1-yr chart

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Source: ACM Managed Income Fund's Discount Under Attack, Merger Proposed