Key Takeaways
- • XA Investments is seeking shareholder approval on July 30, 2026, to replace underperforming sub-adviser Octagon Credit Investors with King Street Capital Management as the new sub-adviser for XAI Floating Rate & Alternative Income Trust (XFLT).
- • Octagon's tenure resulted in a -54% net asset value erosion since inception, marked by persistent underperformance and multiple defaults within its own CLO portfolio, prompting the board's termination decision.
- • The proposed sub-advisory agreement with King Street will maintain flat fees for shareholders with no increase, and the board asserts that improved performance under King Street's management could potentially support lower fees and enhanced distributions over time.
- • Octagon has actively opposed the transition, urging shareholders to disregard proxy materials and vote against the King Street appointment, while simultaneously claiming the change would increase fees—assertions XA Investments has publicly disputed.
- • The special shareholder meeting is scheduled for July 30, 2026, with Octagon's resignation effective on or about the same date, marking a definitive transition in fund management.
Summary
XA Investments LLC, manager of XAI Floating Rate & Alternative Income Trust (XFLT), is mounting a campaign to secure shareholder approval for a pivotal change in investment leadership. On July 30, 2026, shareholders will vote on replacing the fund's current sub-adviser, Octagon Credit Investors LLC, with King Street Capital Management—a transition driven by Octagon's significant underperformance and deteriorating fund metrics.
The performance gap has been substantial and undeniable. Under Octagon's management, XFLT has experienced a -54% net asset value erosion since inception, accompanied by persistent underperformance in its investment strategies. The board has cited these metrics as evidence of a fiduciary failure that necessitates immediate action. Additionally, Octagon's own CLO portfolio has suffered multiple defaults, raising concerns about both asset selection capability and risk management discipline. XA Investments argues that these results represent a breach of management quality standards expected by institutional investors in alternative credit strategies.
The fee structure has become a central point of contention in the proxy contest. XA Investments has explicitly reassured shareholders that approval of King Street's sub-advisory agreement will not trigger any fee increases, maintaining the existing advisory structure. The firm further suggests that if King Street's management produces improved performance, shareholders could potentially benefit from lower fees. This messaging directly counters claims made by Octagon, which has asserted that the transition would increase shareholder costs. According to XA Investments, these Octagon claims are misleading and designed to discourage shareholder support for the transition.
Octagon has conducted an aggressive campaign to block the appointment, including mailing shareholder letters urging investors to disregard XA Investments' proxy materials and refrain from voting. The firm's opposition reflects both financial interests and potential liability concerns, given that Octagon's poor performance directly preceded its termination. Octagon will officially resign effective on or about July 30, 2026, aligning with the shareholder vote date.
XA Investments contends that King Street Capital Management was selected following rigorous evaluation of its track record and capabilities as a leading global alternative asset manager. The board has framed the appointment as essential to restoring shareholder value and supporting stronger distributions. Shareholders are being urged to vote in favor using the WHITE proxy card at the special meeting.
The performance gap has been substantial and undeniable. Under Octagon's management, XFLT has experienced a -54% net asset value erosion since inception, accompanied by persistent underperformance in its investment strategies. The board has cited these metrics as evidence of a fiduciary failure that necessitates immediate action. Additionally, Octagon's own CLO portfolio has suffered multiple defaults, raising concerns about both asset selection capability and risk management discipline. XA Investments argues that these results represent a breach of management quality standards expected by institutional investors in alternative credit strategies.
The fee structure has become a central point of contention in the proxy contest. XA Investments has explicitly reassured shareholders that approval of King Street's sub-advisory agreement will not trigger any fee increases, maintaining the existing advisory structure. The firm further suggests that if King Street's management produces improved performance, shareholders could potentially benefit from lower fees. This messaging directly counters claims made by Octagon, which has asserted that the transition would increase shareholder costs. According to XA Investments, these Octagon claims are misleading and designed to discourage shareholder support for the transition.
Octagon has conducted an aggressive campaign to block the appointment, including mailing shareholder letters urging investors to disregard XA Investments' proxy materials and refrain from voting. The firm's opposition reflects both financial interests and potential liability concerns, given that Octagon's poor performance directly preceded its termination. Octagon will officially resign effective on or about July 30, 2026, aligning with the shareholder vote date.
XA Investments contends that King Street Capital Management was selected following rigorous evaluation of its track record and capabilities as a leading global alternative asset manager. The board has framed the appointment as essential to restoring shareholder value and supporting stronger distributions. Shareholders are being urged to vote in favor using the WHITE proxy card at the special meeting.
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