Investor Netter pushes FSD to restructure or return cash

NEW YORK (Reuters) – Investment manager Donald Netter is stepping up his battle with First Trust High Income Long/Short Fund (FSD) by asking the closed-end fund to restructure or give investors their money back because it has been trading at a discount for years.

Netter, whose Dolphin Limited Partnership I LP owns 450,000 shares of FSD valued at approximately $6.7 million, is criticizing the First Trust fund for trading at 13% below the fund’s net asset value.

While closed-end funds sometimes trade at a discount the range is traditionally much smaller, analysts said. Netter, who first began complaining to FSD a year ago, said the fund’s managers have failed to appropriately swap out certain fixed rate securities at a time interest rates are rising.

“Dolphin now resubmits a revised proposal, which it originally had made to FSD in December 2018, designed to close the persistent and sizable market discount to net asset value or, in the alternative, nearly a year later, promptly liquidate the Fund,” Netter wrote to FSD in a letter seen by Reuters.

To ratchet up the pressure on FSD, Netter said he plans to make his letter public for all investors to see.

Mackay Shields LLC subadvises the fund. A representative for First Trust Advisors could not be immediately reached for comment.

Netter is not the first investor to criticize FSD. Two years ago, Saba Capital Management, the $1.7 billion hedge fund run by Boaz Weinstein, reached a settlement with the fund that included a cash tender offer for 15% of the fund’s outstanding common shares.

One reason for the persistent discount is that this fund, unlike some other similar offerings from Blackstone, Nuveen and Eaton Vance, is that the FSD fund is a perpetual fund with no target date for it to be wound down.

Reporting by Svea Herbst-Bayliss

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