XAI Addresses Shareholder Concerns Regarding Sub-Adviser Transition Ahead of Critical July 30 Vote
CHICAGO – In advance of the XAI Floating Rate & Alternative Income Trust (XFLT) Special Meeting scheduled for July 30, 2026, XA Investments LLC (XAI) has launched a direct outreach campaign to address shareholder concerns. Through a series of explanatory videos, XAI leadership is working to clarify the rationale behind the Board’s unanimous decision to terminate the fund’s long-standing sub-adviser, Octagon Credit Investors. XAI maintains that the move is essential to rectify years of underperformance and to address alarming instability within the current portfolio, urging shareholders to cast their votes on the WHITE proxy card in favor of appointing Rockford Tower Asset Management, a subsidiary of King Street Capital Management, as the new sub-adviser.
The core of XAI’s argument lies in the significant erosion of the fund’s Net Asset Value (NAV) since its inception in 2017. Kimberly Flynn, President of XAI, emphasized that Octagon was solely responsible for all investment decisions during this period, presiding over a decline in NAV per share of approximately 54.40%. This loss represents roughly $406.7 million in eroded capital as of March 31, 2026. Flynn contends that this decline is a direct consequence of poor investment management, prompting the Board to seek a leadership change to protect shareholder interest and stabilize the fund’s long-term trajectory.
Adding further weight to the case for termination, XAI highlighted troubling deficiencies in Octagon’s broader credit performance. Citing a June 2026 report from S&P Global Ratings, XAI noted that Octagon-managed Collateralized Loan Obligations (CLOs) suffered defaults across seven debt tranches within five separate CLOs. XAI underscored the severity of this statistic, noting that such defaults are statistically rare, with global CLO defaults reaching only eleven total cases across the entire market during 2024 and 2025 combined. Octagon’s 2026 performance, therefore, has significantly outpaced recent global default trends, raising urgent questions regarding their risk management practices.
In the wake of these concerns, the XFLT Board underwent a competitive selection process to identify a replacement capable of restoring the fund’s institutional health. Rockford Tower Asset Management, a division of the global alternative investment firm King Street Capital Management, was the unanimous choice. King Street brings to the table a massive infrastructure, overseeing $30 billion in assets and managing a diverse portfolio of 20 U.S. and 9 European CLOs. With a team twice the size of Octagon’s, King Street brings a depth of talent and geographic reach that XAI believes will provide the stability and expertise required to navigate the current volatile credit environment effectively.
Looking forward, the transition to King Street is expected to modernize the fund’s operational strategy. Beyond organizational capacity, King Street plans to implement a more dynamic investment approach for XFLT. This includes expanding into higher-level income opportunities, such as European bank loans and asset-backed securities, which were previously underutilized. By diversifying the portfolio across global markets and credit structures, the new sub-adviser aims to pivot toward a strategy that prioritizes proactive risk management and income growth, aiming to reverse the NAV erosion experienced under the previous regime.
As the July 30, 2026, Special Meeting approaches, XAI is calling on all shareholders to participate in the democratic process by voting “FOR” the King Street Sub-Advisory Agreement. The firm has simplified the process, allowing shareholders to vote via the WHITE proxy card through the internet, telephone, or by mail. To ensure transparency and support, XAI has engaged Okapi Partners LLC to assist shareholders with any questions regarding the transition. With the fund’s future performance at stake, XAI remains focused on securing the necessary backing to finalize this transition and pivot XFLT toward more reliable, sustainable outcomes for its investors.