Putnam Recommends Closed-end Fund Merger (CEFs: PTM, PGM, PIM, PPT)

Putnam announced that the trustees of the Putnam Funds have approved merging the Putnam Managed High Yield Trust (CEF: PTM) into an open end Putnam fund. A shareholder vote on the proposal will be held later this year.

If one were cynical they could perceive the timing of this announcement to be an attempt by the trustees to save the three Putnam funds that will present open-ending proposals to shareholders this June, by sacrificing the much smaller PTM. By recommending the merging away of PTM, it makes it appear as though the trustees have seriously considered the open-ending proposals instead of automatically opposing them in order to protect Putnam’s management fees.

But I am not cynical since I don’t believe that Putnam has any reason to worry that the open-ending proposals for the three Putnam funds (PGM, PIM, and PPT) will be approved. However, I do think there is the potential that the discounts for these funds could decrease as we get closer to June and awareness of the open-ending proposals becomes more widespread. If the discounts do decrease significantly because of this, it will probably be temporary, and may be a good time to sell.

DISCLOSURE: I own shares of the Putnam Premier Income Trust (PPT).