Guggenheim wants to open up a former Claymore closed-end fund, and it looks like the fund will also drop a sub-advisor in the process. Yesterday the three-star, $166.3-million TS&W / Claymore Tax-Advantaged Balanced Fund (TYW) revealed that its board of trustees approved a plan to convert it into an open-ended mutual fund, pending a shareholder vote in the fourth quarter. And it appears that Thompson, Siegel & WalmsleySMC Fixed Income Management will no longer sub-advise the fund after the conversion.
MFWire.com could not immediately reach spokespeople for Guggenheim or SMC for comment on the planned conversion.. TS&W (an Old Mutual boutique) research director Tom Thompson declined to comment for this story.
Guggenheim bought Claymore Securities in 2009 and rebranded it as Guggenheim Funds Distributors a year later.
According to the release, after the conversion Guggenheim subsidiary Security Global Investors will take over the fund as advisor and Guggenheim Partners Asset Management will sub-advise, while Rydex Distributors will handle distribution. Guggenheim bought Security Benefit -- including its subsidiary, Rydex -- last year. The release makes no mention of SMC or TS&W having a role with the fund going forward.
Why is Guggenheim making the change? The Chicago-based asset manager expects to cut the management portion of the fund's expense ratio from 70 basis points to 50 bps, and it wants "to resolve the discount at which TYW's common shares have traded," i.e. allow shareholders to buy and sell shares of the fund at net-asset value (NAV).
Guggenheim's move follows proposal Brooklyn Capital Management submitted to the fund's board on Monday [see filing]. BCM offered to take the fund over from Guggenheim and cut the management fee to 60 bps, while keeping the sub-advisors, keeping the fund closed and giving shareholders a chance to sell their shares back at NAV -- the fund closed at a 3.26 percent discount from NAV yesterday.
Company Press Release
LISLE, Ill., Aug 11, 2011 -- TYW +1.76% TS&W / Claymore Tax-Advantaged Balanced Fund ("TYW") announces that, following approval by its Board of Trustees (the "Board"), it entered into an agreement to reorganize TYW into a newly created open-end mutual fund (the "Reorganization"). The fund, after the Reorganization, is referred to herein as the "Open-End Fund."
The Board believes that the Reorganization is in the best interest of TYW and its shareholders and is intended to provide the following benefits to shareholders, among others:
-- Opportunity to continue to invest in a strategy consistent with a significant component of TYW's investment strategy managed by a high-quality asset manager;
-- Continuous liquidity at net asset value;
-- Reduced management fee and lower projected expense ratio; and
-- Potential growth of the Open-End Fund through the robust distribution capabilities of a proven sales organization, Rydex Distributors, LLC. Over time, increased asset growth may lead to an even lower expense ratio for shareholders of the Open-End Fund.
The Board considered several alternatives to TYW's current structure over a series of meetings in an effort to resolve the discount at which TYW's common shares have traded and provide value for all shareholders of TYW. The Board concluded that the Open-End Fund features described above would be more beneficial to TYW shareholders than proposals in which TYW would remain a closed-end fund and provide common shareholders with a limited opportunity for liquidity through a tender offer, particularly a tender offer at a price below net asset value.
The Open-End Fund would seek to provide current income with an emphasis on income exempt from federal income tax, while also considering capital appreciation. The Open-End Fund will invest primarily in tax-exempt municipal securities and investing in dividend-paying common stocks and preferred securities and other income securities would not be a principal investment strategy of the Open-End Fund.
Security Global Investors(SM)would serve as investment adviser to the Open-End Fund and Rydex Distributors, LLC would distribute the Open-End Fund. Guggenheim Partners Asset Management, LLC ("GPAM") would serve as investment sub-adviser to the Open-End Fund. GPAM is a subsidiary of Guggenheim Partners, LLC and Security Global Investors(SM)and Rydex Distributors, LLC are subsidiaries of Security Benefit Corporation, which is a subsidiary of Guggenheim SBC Holdings, LLC, an entity managed by an affiliate of Guggenheim Partners, LLC. Guggenheim Partners, LLC is the parent company of TYW's current investment adviser, Guggenheim Funds Investment Advisors, LLC. The Reorganization is expected to result in an overall reduction in the management fee from 0.70% of the average daily managed assets to 0.50% of the average daily managed assets.
GPAM would manage the Open-End Fund utilizing a dynamic strategy that combines a rigorous municipal security selection process with a relative value analysis. There can be no assurance that the Open-End Fund will be successful in achieving its investment objective. Upon the Reorganization, common shares of TYW would cease to trade on the New York. Stock Exchange ("NYSE"); however, shares of the Open-End Fund would be redeemable by shareholders at net asset value on a daily basis.
The Reorganization is subject to approval by shareholders of TYW. It is expected that a proposal to approve the Reorganization will be submitted to shareholders of TYW at a special meeting of shareholders (the "Special Meeting"), which is expected to occur in the 4th quarter of 2011. There can be no assurance that the necessary percentage of shareholders of TYW will vote to approve the Reorganization and, if approved by shareholders of TYW, the Reorganization would remain subject to certain other conditions, including customary closing conditions. If the Reorganization is not approved by shareholders of TYW, the Board will consider what actions to take at such time.
If the Reorganization is approved by shareholders of TYW, all of the outstanding Auction Market Preferred Shares ("AMPs") of TYW will be redeemed prior to the closing of the Reorganization, which is expected to occur in the 4th quarter of 2011.
Any solicitation of proxies by TYW in connection with the Special Meeting will only be made pursuant to proxy materials filed with the Securities and Exchange Commission (the "SEC") under applicable federal securities laws.
TYW and its trustees and executive officers may be deemed to be participants in the solicitation of proxies from shareholders in connection with the Special Meeting of shareholders. A prospectus/proxy statement will be filed with the SEC in connection with this solicitation of proxies for the Special Meeting as part of a registration statement on Form N-14. Information regarding the names of TYW's trustees and executive officers and their respective interests in TYW may be found in TYW's annual report to shareholders dated December 31, 2010 and TYW's proxy statement relating to its 2010 annual meeting of shareholders, each which may be obtained free of charge at the SEC's website at www.sec.gov .
Promptly after the registration statement on Form N-14 is declared effective by the SEC, the definitive prospectus/proxy statement and a proxy card will be mailed to each shareholder of TYW entitled to vote at the Special Meeting. The prospectus/proxy statement will contain important information, including a more detailed description of the Reorganization and the Open-End Fund. Therefore, shareholders are urged to read the prospectus/proxy statement (including any amendments or supplements thereto) and any other relevant documents filed with the SEC when they become available. Shareholders will be able to obtain, free of charge, copies of the prospectus/proxy statement and any other documents filed with the SEC in connection with the Special Meeting at the SEC's website at www.sec.gov , by calling 800-345-7999 or by writing to 2455 Corporate West Drive, Lisle, Illinois 60532.
The foregoing is not an offer to sell, nor a solicitation of an offer to buy, shares of TYW, nor is it a solicitation of any proxy.
Guggenheim Funds Investment Advisors, LLC acts as the Investment Adviser for TYW. Guggenheim Funds Distributors, Inc. and its affiliates (together, "Guggenheim Funds") offer strategic investment solutions for financial advisors and their valued clients. As an innovator in exchange-traded funds (ETFs), unit investment trusts (UITs) and closed-end funds (CEFs), Guggenheim Funds often leads its peers with creative investment strategy solutions. Guggenheim Funds provides supervision, management or servicing of assets with a commitment to consistently delivering exceptional service. Guggenheim Funds is a subsidiary of Guggenheim Partners, LLC, a global, diversified financial services firm with more than $100 billion in assets under management and supervision. Guggenheim Partners, LLC, through its affiliates, provides investment management, investment advisory, insurance, investment banking, and capital markets services. The firm is headquartered in Chicago and New York with a global network of offices throughout the United States, Europe, and Asia.
Rydex|SGI funds are distributed by Rydex Distributors, LLC (RDL). Security Investors, LLC (SI) is a registered investment advisor, and does business as Security Global Investors(R) and Rydex Investments. SI and RDL are affiliates and are subsidiaries of Security Benefit Corporation, which is a subsidiary of Guggenheim SBC Holdings, LLC, an entity managed by an affiliate of Guggenheim Partners, LLC.
There can be no assurance that TYW will achieve its investment objectives. The net asset value of TYW will fluctuate with the value of the underlying securities. It is important to note that closed-end funds trade on their market value, not net asset value, and closed-end funds often trade at a discount to their net asset value. Past performance is not indicative of future performance. An investment in TYW is subject to certain risks and other considerations. Such risks and considerations include, but are not limited to: Investment Risk, Market Discount Risk, Interest Rate Risk, Credit Risk, Lower-Grade and Unrated Securities Risk, Leverage Risk, Issuer Risk, Country Risk, Prepayment Risk, Reinvestment Risk, Derivatives Risk, Inflation/Deflation Risk, Management Risk, Turnover Risk, Anti-Takeover Provisions, Smaller Company Risk, and Market Disruption, Geopolitical Risk and AMPS Risk.
Investors should consider the investment objectives and policies, risk considerations, charges and expenses of TYW carefully before they invest. For this and more information, please contact a securities representative or Guggenheim Funds Distributors, Inc., 2455 Corporate West Drive, Lisle, Illinois 60532, 800-345-7999.
NOT FDIC - INSURED * NOT BANK - GUARANTEED * MAY LOSE VALUE