GER - GER To Liquidate Voluntarily

2023-07-04 05:45:32 ET

Summary

• GER to liquidate, voluntarily (!).
• Saba had a position, but was otherwise uninvolved.
• However, current alpha potential is slim.

Author's note: This article was released to members of CEF/ETF Income Laboratory as part of the CEF Weekly Roundups on June 14, 2023, with certain numbers updated. Please check the latest data before investing.

Goldman Sachs MLP and Energy Renaissance Fund (GER) has announced its plan to liquidate. This plan is not subject to shareholder approval. From the press release:

Goldman Sachs Asset Management ("GSAM"), investment adviser for the Goldman Sachs MLP and Energy Renaissance Fund (the "Fund") (NYSE: GER), announced today that the Fund's Board of Trustees, at the recommendation of GSAM, has approved a plan of liquidation and dissolution (the "Plan") for the Fund. Under the Plan, which is effective today, the Fund will begin the process of liquidating portfolio assets and unwinding its affairs in an orderly fashion over time. The Plan is not subject to shareholder approval.

Kyri Loupis, co-chief investment officer of the Liquid Real Assets business within GSAM and portfolio manager for GER stated: "After careful consideration, we concluded that liquidating the Fund was the best path forward in order to realize value to shareholders. In the last three years, we have taken multiple steps to reduce the Fund's discount to net asset value including increasing the dividend by 55% and conducting a buyback program which resulted in the retirement of 2.58 million shares or 15.0% of total shares outstanding. We remain very constructive on the fundamentals of the energy infrastructure sector and believe that it is poised to deliver attractive growth in the next few years."

Additional information about the Fund's liquidation, including the anticipated timing and amount of the Fund's liquidating distribution to shareholders, will be released in advance of the completion of the Fund's liquidation.

In their announcement, the portfolio managers indicated that they had made attempts to close the discount of GER, such as hiking the dividend by 55% and conducting a buyback program which retired 15% of outstanding shares. Nevertheless, the discount wallowed at near -20% levels before this announcement, and thus it was concluded that "liquidating the Fund was the best path forward in order to realize value to shareholders."

Of course, fund managers rarely liquidate their own funds on their own volition, as this would surrender AUM and fee income. But could this be one of the few exceptions?

As indicated in our handy Saba Activist Tracker tool for members, GER was the 19th Saba CEF position, as ranked by percentage ownership stake. The ownership percentage was 8.42%, corresponding to a nominal stake of $20.69 million.

What is interesting is that Saba had filed a 13G (and not a 13D) with GER, meaning that it was a less than 10% position or showing only passive intent. This means that Saba had not yet even begun its proxy campaigns against GER, such as by nominating replacement board members or pushing for liquidation or open-ending of the CEF.

Boaz Weinstein himself confirmed this in a tweet :

We can only speculate as to why Goldman Sachs decided to volunteer to shutter their own fund. Possibly, they wanted to avoid a potential upcoming battle with Saba, in which they would be unlikely to win. GER has been one of the underperforming MLP/midstream CEFs, severely trailing our Tactical Income-100 portfolio holdings such as FIF and FPL (which were purchased before the calamitous 2020 crash).

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