XA Investments to Become Investment Adviser to Madison Investments Closed-End Fund and Will Retain Madison Investments as Portfolio Manager

Rhea-AI Summary

XA Investments (XAI) has announced a pending transaction to become the investment adviser for the Madison Covered Call & Equity Strategy Fund (NYSE: MCN), a $146 million listed closed-end fund. This move is subject to MCN shareholder approval and is expected to occur in Q4 2024. Notably, Madison Investments will retain portfolio management responsibilities as sub-adviser, also pending shareholder approval.

The acquisition would expand XAI's closed-end fund platform to three funds. Ray Di Bernardo, who has managed MCN for 20 years, expressed excitement about continuing to deliver lower volatility and strong cash flows to shareholders. XAI aims to provide superior growth in assets under management, continuity of the existing portfolio management team, and enhanced investor relations for MCN shareholders.

Positive

• XAI to become investment adviser for a $146 million listed closed-end fund (MCN)
• Madison Investments to retain portfolio management responsibilities as sub-adviser
• Expansion of XAI's closed-end fund platform to three funds
• Continuity of existing portfolio management team with 20 years of experience

Negative

• None.

Insights

Financial Analyst

The transition of XA Investments (XAI) becoming the investment adviser to the Madison Covered Call & Equity Strategy Fund (MCN) is noteworthy. This change could potentially streamline management processes and improve fund performance by leveraging XAI’s expertise in alternative investments. With $146 million in assets, the fund's management will benefit from XAI's robust platform, which already includes the XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) and the Octagon XAI CLO Income Fund (OCTIX).

Key aspects for investors to consider include:

1. Scale Efficiencies: As XAI expands its range of managed funds, there can be increased economies of scale, reducing operational costs and potentially improving net returns for investors.

2. Continuity in Portfolio Management: Retaining Madison Investments as the sub-adviser ensures that the fund's strategy and performance history remain consistent. This continuity can be important for investors who value stability in fund management.

3. Enhanced Investor Relations: XAI’s focus on investor relations may lead to better communication and transparency, fostering greater investor confidence.

Possible Challenges: The transaction is subject to shareholder approval, which means there could be delays or opposition. Additionally, it remains to be seen how quickly the anticipated benefits will materialize.

Overall, this move could be beneficial for shareholders, positioning the fund for potential growth and improved management efficiency in the long run.

Market Research Analyst

From a market perspective, XA Investments’ acquisition of the advisory role for MCN signifies a strategic consolidation within the closed-end fund sector. This move aligns with a broader trend of increasing demand for equity income funds, which appeal to investors seeking stable income and lower volatility.

Why This Matters:

1. Investor Demand: The acquisition reflects growing investor appetite for products offering steady income, particularly in a volatile market environment. Closed-end funds like MCN, which focus on covered call strategies, are designed to generate income while aiming to mitigate downside risk.

2. Strategic Growth: By integrating MCN into its platform, XAI can leverage its existing infrastructure to enhance fund performance and investor outreach. This could potentially attract new investors and increase assets under management.

Considerations for Investors: The success of this transition will depend on how effectively XAI and Madison Investments can collaborate to optimize the fund's strategy and performance. There may also be initial uncertainties as the transition is subject to shareholder approval, which might influence short-term investor sentiment.

In the long term, this strategic move could amplify XAI’s market presence and provide robust income-generating options for investors.

Reflects Increasing Investor Demand for Equity Income Funds

CHICAGO--(BUSINESS WIRE)-- XA Investments (XAI), an alternative investment management and consulting firm, announced the pending transaction, by which XAI will become investment adviser to the Madison Covered Call & Equity Strategy Fund (NYSE: MCN), a $146 million listed closed-end fund. The transaction is subject to approval by MCN shareholders. Notably, Madison Investments will maintain portfolio management responsibilities as sub-adviser to MCN, also subject to approval by MCN shareholders.

XAI is committed to providing investors with access to institutional-caliber investments. The acquisition would expand the number of closed-end funds currently on the XAI platform to three - XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT), Octagon XAI CLO Income Fund (OCTIX) and Madison Covered Call and Equity Strategy Fund. XAI continues to seek additional opportunities consistent with its mission of providing better products with better portfolio outcomes for investors.

Portfolio manager, Ray Di Bernardo, who has managed MCN for 20 years, said “We are excited to continue to deliver lower volatility and strong cash flows to our shareholders. Partnering with XAI will allow us to focus on investment management, ensuring that the best interests of MCN’s shareholders are upheld. It will enable Madison Investments to pursue its strategic growth priorities, including an investment lineup of separately managed accounts, open-end mutual funds, and active ETFs.”

“I am pleased to welcome Madison Investments to the XAI closed-end fund platform,” said Kimberly Flynn, President of XAI. I believe that XAI can deliver three primary benefits to the shareholders of the Madison Covered Call & Equity Strategy Fund: (1) superior growth in assets under management and scale efficiencies; (2) continuity of the existing portfolio management team; and (3) enhanced investor relations.”

As noted above, XAI’s appointment as investment adviser to MCN is subject to shareholder approval and is expected to occur in the fourth quarter of 2024.

About XA Investments

XA Investments LLC (“XAI”) is a Chicago-based firm founded by XMS Capital Partners in 2016. XAI serves as the investment adviser for both a listed closed-end fund and an interval closed-end fund, respectively the XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT) and the Octagon XAI CLO Income Fund (OCTIX).

In addition to investment advisory services, the firm also provides investment fund structuring and consulting services focused on registered closed-end funds to meet institutional client needs. XAI offers custom product build and consulting services, including product development and market research, sales, marketing and fund management.

XAI believes that the investing public can benefit from new vehicles to access a broad range of alternative investment strategies and managers. XAI provides individual investors with access to institutional-caliber alternative managers. For more information, please visit www.xainvestments.com.

About Madison Investments

Madison Investments is an independent investment management firm based in Madison, WI. The firm was founded in 1974, has approximately $26 billion in assets under management as of March 31, 2024, and is recognized as one of the nation’s top investment firms. Madison Investments offers domestic fixed income, U.S. and international equity, covered call, multi-asset, insurance, and credit union investment management strategies.

“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC, and Madison Investment Advisors, LLC. Madison Funds are distributed by MFD Distributor, LLC. Madison is registered as an investment adviser with the U.S. Securities and Exchange Commission. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority (www.finra.org).

Important Additional Information and Where to Find It

MCN has filed a preliminary proxy statement and intends to file the definitive proxy statement (the “Proxy Statement”) with the U.S. Securities and Exchange Commission (the “SEC”) in connection with the proposed acquisition and solicitation of proxies at a forthcoming special meeting of shareholders of MCN in the fourth quarter of 2024 (the “2024 Special Meeting”). Prior to the 2024 Special Meeting, MCN will file with the SEC and subsequently distribute to MCN shareholders of record as of July 22, 2024, the Proxy Statement together with a proxy card. SHAREHOLDERS ARE URGED TO READ THE PROXY STATEMENT (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND ANY OTHER RELEVANT DOCUMENTS THAT ARE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Shareholders will be able to obtain, free of charge, copies of the Proxy Statement, any amendments or supplements thereto and any other documents (including the proxy card) when filed by MCN with the SEC in connection with the 2024 Special Meeting at the SEC’s website (http://www.sec.gov) or at the website disclosed in the Proxy Statement.

The Fund’s shareholders will be able to obtain copies of the definitive proxy statement and accompanying materials, when available, by calling the Fund’s proxy agent toll-free at 1-866-679-6748.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240717309487/en/

Kimberly Flynn, President

XA Investments LLC

Phone: 888-903-3358

Email: KFlynn@xainvestments.com

www.xainvestments.com

Source: XA Investments LLC

FAQ

What is the pending transaction announced by XA Investments (XAI) regarding MCN?

XAI announced a pending transaction to become the investment adviser for the Madison Covered Call & Equity Strategy Fund (NYSE: MCN), a $146 million listed closed-end fund, subject to MCN shareholder approval.

When is the XAI appointment as investment adviser to MCN expected to occur?

XAI's appointment as investment adviser to MCN is expected to occur in the fourth quarter of 2024, subject to shareholder approval.

Will Madison Investments continue to manage the MCN portfolio after the transaction?

Yes, Madison Investments will maintain portfolio management responsibilities as sub-adviser to MCN, subject to MCN shareholder approval.

How many closed-end funds will be on the XAI platform after this acquisition?

After the acquisition, XAI's closed-end fund platform would expand to three funds: XAI Octagon Floating Rate & Alternative Income Trust (NYSE: XFLT), Octagon XAI CLO Income Fund (OCTIX), and Madison Covered Call and Equity Strategy Fund (NYSE: MCN).