FGF: A Way to Piggyback Activist Investors

SunAmerica Focused Alpha growth Fund (ticker:FGF) is a closed end fund that uses two well known growth managers. The fund manages about $300 million in assets. 65% of the fund is invested in about twenty large cap stocks and is run by Tom Marsico. The remaining 35% of the fund in invested in about 20 small/mid-cap stocks and is run by Ronald Baron. Recently it has sold at a discount to NAV of about 10%.

At least two well known activist firms have a position in FGF. Bulldog Investors (run by Phil Goldstein and Andrew Dakos) owns 14.22% of the shares as of their Feb. 1 filing. They have been steadily adding to their FGF holdings almost every day. Karpus Investors owns 6.50% of the shares.

Bulldog Investors, sent a letter to FGF on November 12, 2009. They announced their intention to:

i)                    Nominate two directors to the FGF board at the next annual meeting.

ii)                   Submit a shareholder proposal recommending that shareholders have the opportunity to the realize net asset value of the fund.

FGF uses a managed distribution plan where they make level quarterly payments (currently $0.05 per share) and increase the fourth quarter payment as needed to satisfy the minimum distribution requirements of the IRS.

The FGF discount to NAV is currently below the 52 week average discount of 15%, but has recently increased from 8% to 10% in the last month. Because of the activist involvement, I think there is a good possibility that management will take further actions to narrow the discount to NAV.

Ticker: FGF     SunAmerica Focused Alpha Growth Fund, Inc.   pays quarterly distributions

  • Total Assets= 297MM
  • Annual Distribution (Market) Rate= 2.66%    Income Only Yield= 0.00%
  • Fund Expense ratio= 1.17%              Discount to NAV= -9.85%
  • Portfolio Turnover rate= 89%
  • No leverage used

Full Disclosure: Long FGF.


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