XA Investments says the switch would not raise shareholder fees, cites XFLT’s -54% NAV erosion and argues King Street’s CLO platform offers stronger capabilities after Octagon’s termination.
A proxy fight over the management of XAI Floating Rate & Alternative Income Trust has intensified ahead of the Fund’s July 30, 2026 Special Meeting, with XA Investments LLC and terminated sub-adviser Octagon Credit Investors offering sharply different accounts of fees, performance and the proposed replacement of Octagon with a King Street affiliate. XA Investments has urged shareholders to vote on the WHITE proxy card in favor of a new sub-advisory agreement with Rockford Tower Asset Management, L.L.C., a wholly owned subsidiary of King Street Capital Management, L.P. It said the change would not raise the Fund’s management fees or expenses for shareholders and argued that, under the proposed arrangement, XA Investments could earn less in fees than under the current structure if the Fund recovers from what it described as severe NAV erosion. The manager reiterated that the Board terminated Octagon after reviewing XFLT’s results, saying that as of March 31, 2026, the Fund underperformed its benchmark by -19.09% over one year, lagged over the three-year, five-year and since-inception periods, and suffered approximately -54% NAV per share decline, implying $406.7 million of current-share-equivalent NAV erosion. XA Investments also cited seven CLO defaults in Octagon’s own CLO portfolio in 2026 and said Octagon’s proposal to take over as adviser is not on the ballot. XA Investments said its management and the Fund Board collectively own about 272,859 XFLT shares, while arguing that King Street’s 30-year track record, $30 billion in assets under management and CLO platform spanning 20 U.S. CLOs, 9 European CLOs and about $12 billion in CLO assets under management make it better positioned to improve performance and support distributions over time. Octagon, by contrast, is urging shareholders to vote AGAINST the proposal on its BLUE proxy card. It has said the Board is seeking to replace Octagon while increasing fees paid to XAI, argued that the Fund’s underlying investments outperformed their relevant indices and that the Fund outperformed peers on both total shareholder return and NAV return, and said the Board used questionable criteria and inadequate diligence in selecting King Street, including despite reported redemption restrictions at King Street’s flagship hedge fund. The dispute now centers on whether shareholders accept the Board’s case that King Street could improve performance and distributions over time without raising fees, or Octagon’s claim that the proposed change mainly shifts economics toward XAI without tangible shareholder benefits.