Activist Investor Alert: Putnam and MFS Closed-End Funds May Be On the Block

Includes: MGF, PGM
by: CEFblog

I came across this article last week that stated that Putnam Investments and MFS Investment Management might really be put up for sale by their parent companies. This could have an impact on all of their closed-end funds because shareholders would have to approve new management agreements if the fund families were sold.

Many of the Putnam and MFS closed-end funds are trading at double-digit discounts, so they could be tempting targets for hedge funds. If the hedge funds can prevent new management agreements from being approved as closed-end funds, the fund families may compromise and agree to open-end some of them.

Any of the funds trading at large discounts could be a target for activist investors, but at this point I think the Putnam Investment Grade Municipal Trust (NYSEARCA:PGM) and MFS Government Markets Income Trust (NYSE:MGF) are the most likely targets. They have both been trading at big discounts for a long time, and Karpus Investment Management is a large investor in each of them. In both the Citigroup/Legg Mason and Merrill Lynch/BlackRock transactions, Karpus played an activist role with some of their funds, so I wouldn't be surprised to see them do it again if the Putnam or MFS businesses are sold.