I just noticed that the closed end fund, Tri-Continental (TY), was discussed in the 13D Filings section of Barron’s this weekend. As you might recall, I purchased shares of Tri-Continental last year. At the time, Tri-Continental was trading for about a 15 to 16 percent discount on its net asset value. With two new fund managers brought on board, I figured there was a good chance that this discount would decrease over time. However, until recently, the opposite has happened.
Within the past couple of weeks, the discount to net asset value has decrease from over 17 percent to 13 percent today. The catalyst for this change has been the shareholder activism of Western Investment. Western Investment originally filed a form SC 13D with the SEC on January 6, 2006 and amended that filing on January 10th. In addition, on January 13th, Western Investing’s dissident activities were detailed in an article published by Dow Jones Newswires and also submitted to the SEC.
Western Investment LLC is spearheading an effort to gain representation on Tri-Continental’s board of directors, citing frustration that the fund is trading below the net asset value of its underlying assets. Such a campaign could be a harbinger for more drastic measures, including pressure to convert Tri-Continental into a traditional mutual fund or liquidation.
“I think the long-term shareholders have to be very disappointed with their investments as evidenced by the continued, persistent discount which the fund has traded at,” said Art Lipson, manager of Western Investment, representing a group of shareholders holding 6.4% of the shares outstanding. He noted that the 77-year old fund with $2.4 billion in assets has traded at a double digit discount since 1992.
Western’s group said in a filing with the Securities and Exchange Commission last week that it intends to nominate four candidates to the fund’s board at the annual shareholders meeting because it’s concerned by Tri-Continental’s performance and believes the board hasn’t taken appropriate action.
I support Western Investment’s efforts in reducing the rediculous discount on Tri-Continental shares. As small individual shareholders, there is probably very little I can do individually to address a problem like this one. However, collectively under the leadership of large shareholder, we may be able to effect change.
If you own shares of Tri-Continental, I encourage you to voice your concerns here in the comments section below. I’ll share a link to this page with Western Investment and Tri-Continental in a few days. Maybe, we can utilize blog technology to collectively pool the interests of small individual shareholders to also effect some change with company and fund boards.