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Morning Brief: Credit Suisse Sees Microsoft Issuing One-Time Dividend

The hedge fund favorite got a boost from the investment bank, which thinks Microsoft’s commercial cloud business can grow even more.

  • By Stephen Taub

Credit Suisse raised its price target on hedge fund favorite Microsoft from $95 to $115. In a note to clients, the investment bank said its proprietary survey suggests that momentum in the company’s commercial cloud business “should continue throughout 2018.” It also speculates that if the software company repatriates some or all of its overseas cash, it could issue a one-time $14 per share special dividend.

However, it cautions it views a dividend that large “as unlikely.” Rather, it expects a combination of a one-time dividend of $6 to $9 per share combined with an increase in share buybacks. Credit Suisse says Microsoft has $132 billion in cash held by foreign subsidiaries, which works out to $112 billion, net of tax. At the end of the third quarter, Microsoft was the second-most widely held stock among hedge funds, with at least 241 owners, according to Novus. Shares of Microsoft Thursday closed relatively unchanged at $90.10.

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Boaz Weinstein’s Saba Capital Management has filed a preliminary proxy challenging Alpine Total Dynamic Dividend Fund, a closed-end mutual fund. In a regulatory filing, Saba, which owns 9 percent of the shares, said it opposes the fund’s decision to hire Aberdeen Asset Managers as its new investment adviser.

“While Saba believes that the Fund is in need of a new investment adviser,” Saba stated in the filing, the firm thinks shareholders should not approve a new advisory agreement before the fund and its current investment advisor allows shareholders “to realize a financial benefit,” since shareholders have “suffered poor investment returns over the past ten years.”

It calls on current advisor Alpine Woods Capital Investors to allow current shareholders to sell their shares at net asset value (NAV), which Saba believes “would likely result in an immediate return on investment for long-term shareholders.” The fund currently trades at an 8.6 percent discount to NAV. Saba also urges shareholders to withhold support to elect four trustees for the fund.

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J. Tomilson Hill is stepping back from his day-to-day role as president and chief executive officer of Blackstone Alternative Asset Management. He will become chairman while John McCormick will succeed him as president and CEO. In a press release, Blackstone said Hill “will maintain strong relationships with BAAM’s investor base and hedge fund relationships” and provide ongoing strategic advice to senior management. He will also continue as vice chairman of Blackstone and as a member of the board of directors and management committee.

Hill spent 25 years at Blackstone. Chairman, CEO and co-founder Stephen Schwarzman said Hill “took the firm’s hedge fund solutions business from being a less than $1 billion business when he assumed responsibility in 2000, and built it into the world’s largest discretionary investor in hedge funds with more than $75 billion in assets under management today.” McCormick is currently senior managing director and head of global business strategy for the hedge fund solutions group. He joined BAAM in 2005. Last June Institutional Investor honored Hill with a Lifetime Achievement Award.

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