Investor Activism: Montano Urges FINS Shareholders to Reject Investment Agreement

In a bold move reminiscent of classic shareholder activism, Trevor Montano, a shareholder of Angel Oak Financial Strategies Income Term Trust (NYSE: FINS), has taken a stand against a proposed new investment advisory agreement with Angel Oak Capital Advisors, LLC. His message is clear: shareholders should vote against this agreement at the upcoming special meeting. Montano's letter outlines the pressing reasons for his stance, echoing a growing call for accountability and transparency within investment practices.

Montano's concerns stem from the significant decline in FINS's performance, with the fund's share price plummeting over 35% since its inception in 2019. He argues that Angel Oak's management decisions have been detrimental to investor returns, suggesting that their role as advisory is not serving the interests of shareholders. Instead, he believes they should be held responsible for the poor financial outcomes the fund has experienced.

A Call for Change

Just a few months ago, during the 2025 FINS Annual Meeting, shareholders expressed their desire for change by refusing to approve a similar investment advisory agreement. Montano points out that the very members of the board who are advocating for this agreement — Trustees Keith M. Schappert and Andrea N. Mullins — received only 36% of the votes cast, highlighting their lack of legitimacy in representing shareholder interests. This situation raises serious questions about the current governance and decision-making practices within FINS. Montano’s letter clearly states that the board is not acting in the best interests of the shareholders, which could undermine trust and overall fund performance.

Montano emphasizes the fiduciary responsibility that the board holds. It is imperative that they engage the best investment advisor at competitive rates. However, it appears that no competitive selection process has been conducted since FINS's inception, which casts doubt on whether the board is acting in shareholders' best interests. How can shareholders trust the board when a significant majority are either not elected or associated with Angel Oak directly?

Financial Underperformance

The underperformance of FINS under the guidance of Angel Oak is a vital component of Montano's argument. Not only has the advisory led to a decrease in the share price, but it has also resulted in a lack of realization of the full Net Asset Value (NAV) for shareholders. The shares have consistently traded at a discount to NAV, with an alarming median discount of 9.4% over the past five years. The broader financial metrics reveal that FINS has significantly underperformed compared to its peer group, especially in the crucial three- and five-year periods.

Comparing FINS with similar closed-end funds illustrates this underperformance starkly. For instance, while peers show better annualized total shareholder returns in the last year, three years, and five years, FINS trails behind significantly across all measures. Moreover, a critical look at the discount rates reveals that FINS has been trading at double the median discount of peers. This financial strife could be attributed, in part, to an alleged prioritization of Angel Oak's financial interests over those of shareholders.

Misaligned Interests

Montano raises concerns about the potential misalignment of interests between the investment advisor and shareholders. FINS has reportedly incurred more in investment advisory fees than the cumulative net income generated over substantial periods. Such a scenario points to a troubling pattern where Angel Oak may be prioritizing its pecuniary gains from advisory fees over the fund's actual performance and shareholder returns.

Furthermore, Montano accuses Angel Oak of manipulating financial leverage unnecessarily, claiming this is an attempt to enrich themselves at the expense of shareholders, particularly during a turbulent interest rate cycle. His statement strikes at the heart of the governance concerns surrounding both the board and the advisory, suggesting a systemic issue affecting the overall trustworthiness of the fund's management.

Final Thoughts

Montano's message to FINS shareholders is unequivocal: vote against the new investment advisory agreement and any potential adjournment of the special meeting. He calls for a greater awareness of the governance dynamics at play and urges fellow investors to join him in taking a firm stand for accountability. By rejecting the proposed agreement, shareholders may regain control and seek a path towards enhanced governance and improved fund performance.

Trevor Montano, a seasoned private investor with a wealth of experience in financial services, further emphasizes the importance of shareholder engagement and accountability in his advocacy. As investors face a turbulent economic landscape, Montano's efforts reflect a growing sentiment among shareholders who demand greater transparency and responsibility from their boards and advisors. Only through unified action can shareholders assert their rights and influence change at the institutional level.