TIPS Fund at a Discount: Karpus Management Responds to IMF Board

Karpus Management filed today that it has written a letter to the Board of the Salomon Brothers Inflation Management Fund (IMF) in response to the fund's failure to get a new management agreement approved. The letter states that Karpus wants the fund's discount to be eliminated, and that it will oppose any current directors who seek re-election. The Board will have to respond fairly quickly because, as stated before, the interim management agreement with Salomon Brothers Asset Management ends in four short months on April 29, 2006.

Personally, I like the premise of the fund and do not want to see it liquidated or open-ended. It is a good fund to hold as an inflation hedge, and since it is only a year and a half old, we have not seen how the discount will react when inflation picks up. My expectations are that this would cause the discount to decrease. Plus, the discount IMF currently trades at increases the yield from its monthly dividends, assuming you are buying shares now.

That being said, if it is the shareholders will to liquidate or open-end the fund, the Board should follow their wishes without putting up an unnecessary fight.

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