Activist Ratchets Up Proxy Fight With Pimco Bond FundBeth Jinks
A proxy fight at Pacific Investment Management Co.’s Pimco Dynamic Credit Income Fund is heating up as Ironsides Partners seeks shareholder backing to replace two of seven trustees at the closed-end bond fund.
Ironsides wants the bond fund to narrow or eliminate the 10 percent discount to its $3 billion net asset value of liquid bonds, the activist wrote in a letter Thursday. The board should repurchase shares, and consider a tender offer and an overhaul of the fund’s management after it underperformed, despite using “risky” leverage and derivatives designed to amplify returns, Ironsides said.
Pimco, which the activist said was paid $63.2 million in fees last year to manage the bond fund, has re-nominated incumbents who “serve as directors or trustees on 92 different Pimco or Pimco-affiliated funds,” Ironsides wrote. The Boston-based hedge fund went public with its campaign in March, nominating its founder Robert Knapp and an attorney Richard Cohen to take board seats at the April 30 annual meeting.
Newport Beach, California-based Pimco has urged shareholders to support its existing trustees, calling Ironsides a “short term activist hedge fund.”
Pimco has attributed the bond fund’s discount to “the volatile market” since it began in 2013, and said it hadn’t pursued share repurchases or tender offers “because the board believes such actions generally fail to provide lasting benefits for long-term shareholders.”
Pimco suffered the worst year of withdrawals in the history of fund management in 2014 as performance at some strategies stumbled and the firm lost its two highest-profile executives, with former Chief Executive Officer Mohamed El-Erian’s resignation last January and Chief Investment Officer Bill Gross’s departure in September.