Landmark Supreme Court decision is a game-changer for investor activism

Ken Burdon, Partner in the registered fund practice at Simpson Thacher & Bartlett, discusses the Supreme Court's recent ruling against activist investor Saba Capital, a decision that could have a chilling effect on shareholder activism in the future. Burdon says the decision removes a key path based on the Investment Company Act of 1940 that activists took in pursuing cases over fund fees and structure. It doesn't stop the activists from pursuing cases, but makes it harder to do so, forcing them into state courts. Critics of activism have long held that professional arbitrageurs used federal courts to pressure closed-end funds into transactions that benefit activists' short term profit agenda at the expense of the long-term returns and investment objectives that the majority of investors pursued when buying into a specific closed-end fund.