The proxy adviser said the board’s performance case for replacing Octagon Credit Investors with Rockford Tower Asset Management was not supported by an appropriate benchmark and flagged governance concerns.
Egan-Jones recommended that shareholders of XAI Floating Rate & Alternative Income Trust vote against the proposal to replace Octagon Credit Investors with Rockford Tower Asset Management, a King Street Capital Management subsidiary, at the fund’s July 30, 2026 special meeting. The proxy adviser said the board’s central underperformance argument relied on the Morningstar LSTA US Leveraged Loan 100 Index, which it said did not match XFLT’s strategy because the fund allocates across loans, CLO debt, CLO equity and leverage. Using a composite benchmark aligned with the fund’s disclosed allocation, Egan-Jones said the performance picture was materially different. The report also raised governance issues, saying the fund’s overall management fee would stay the same but the adviser’s share of that fee would increase under the proposed arrangement. It further pointed to board relationships with the adviser that, while not proof of improper motives, warranted added scrutiny. Egan-Jones also questioned the board’s stated reasons for selecting Rockford Tower, saying references to a broader platform and access to European CLO markets did not justify replacing the current sub-adviser and that management could not clearly explain how many alternative candidates were meaningfully evaluated. The recommendation adds opposition to a process that previously drew support from Bulldog Investors, LLP, which said it would vote its 310,000 shares in favor after discussions with the fund and after reaching an agreement expected to provide one or more opportunities for shareholders to monetize at least part of their holdings at a price close to NAV. Egan-Jones said the board’s July 27, 2026 tender-offer announcement, which is contingent on approval of the sub-advisory agreement, and Bulldog’s agreement to vote for the proposal under a two-year standstill did not change its view. It said tender offers are decisions for the board and adviser rather than evidence about the sub-adviser choice, while noting shareholders may wish to weigh the board’s decision to link the liquidity opportunity to the vote.