XFLT Board Challenged
Octagon Claims XFLT Board Prioritizes XAI with Fee Hikes, Manager Swap
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Octagon Credit Investors has fired back at the board of XAI Floating Rate & Alternative Income Trust (XFLT), calling the board's claims "increasingly desperate" as a fight over control of the fund intensifies. Barchart reports that Octagon, which has managed the fund's investments for years, accuses the board of trying to push out a proven team while raising fees that benefit XAI, the fund's adviser.
Octagon is urging XFLT shareholders to push back. The firm wants the board replaced with shareholder-focused directors, fees cut, and distributions stabilized. It also wants quick action to close the gap between the fund's share price and its net asset value (NAV) — the true value of its holdings.
Board's Plan Would Raise Fees and Swap Investment Team
The XFLT board has proposed replacing Octagon as the fund's sub-adviser. A sub-adviser is the firm that actually picks the investments. The board wants to bring in a new, untested team instead. According to ADVFN, Octagon says the board seemingly conducted "inadequate diligence" on this proposed replacement.
At the same time, the board's plan would increase the fees flowing to XAI. Octagon says this helps XAI's "subscale business" — meaning XAI is too small to survive without extra income from XFLT. Octagon argues that shareholders would be paying more while getting less experienced management in return.
Octagon Accuses Board of Rewriting History to Protect XAI
Octagon has been XFLT's sub-adviser since the fund launched. The fund was even named after the partnership — it was originally called XAI Octagon Floating Rate and Alternative Income Trust. Market Screener reports that Octagon now accuses the board of trying to "rewrite history" to benefit XAI.
Octagon says the board's trustees have long been financially tied to XAI, calling XAI their "benefactors for years." The firm argues this relationship has led the board to act in XAI's interest rather than in the interest of fund shareholders. That conflict of interest, Octagon says, is why the board needs to be replaced entirely.
Octagon Points to 30 Years of Credit Experience as Its Case
Octagon is leaning hard on its track record. The firm describes itself as "a leading credit-focused asset manager" with 30 years of experience. Credit-focused means the firm specializes in lending-based investments like loans and bonds — exactly what XFLT holds. According to Barchart, Octagon says swapping it out now puts that expertise at risk.
The fund invests in floating rate instruments — loans whose interest payments rise and fall with market rates. Managing these well requires deep expertise. Octagon argues that handing the portfolio to an unproven sub-adviser could hurt performance and further damage the fund's already discounted share price.
Shareholders Asked to Act Fast on Four Key Demands
Octagon has laid out four specific demands for XFLT. First, reconstitute the board with directors who answer to shareholders. Second, lower the fund's fee structure. Third, stabilize distributions — the regular payments investors receive. Fourth, take immediate steps to narrow the fund's discount to NAV, according to ADVFN.
A discount to NAV means the fund's shares trade for less than its assets are worth. This is a common problem for closed-end funds like XFLT and signals weak investor confidence. Octagon says the board has failed to fix this gap and that new leadership is the only path forward for shareholders.
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