BOSTON (Reuters) – Saba Capital’s Tail Hedge Master Fund, which guarantees a type of doomsday insurance coverage by means of bets that carry out properly when markets spiral, ended 2018 with a 25 percent achieve, an individual acquainted with the fund’s returns stated on Tuesday.
FILE PHOTO: Boaz Weinstein, founder and chief funding officer at Saba Capital Management, speaks through the SALT convention in Las Vegas, Nevada, U.S. May 17, 2017. REUTERS/Richard Brian
For years, Boaz Weinstein, who based the New York-based hedge fund a decade in the past, was positive volatility would return to markets whilst knowledge confirmed buying and selling circumstances in early 2018 have been among the many most secure in over 4 many years.
By the year-end, markets almost tumbled into bear market territory – outlined as a 20 percent drop from the excessive – and Weinstein’s fund, designed to guard buyers from sudden occasions, surged.
The agency’s flagship Saba Capital Master Fund additionally carried out properly, climbing 11.1 percent.
A Saba spokesman declined to remark.
In December, when the typical hedge fund misplaced cash as markets plummeted, the Tail Hedge Master Fund gained almost 20 percent, the individual stated.
Saba’s tail fund is certainly one of a handful of portfolios that performs off of the definition of tail danger, which describes occasions when greater shocks than regular happen. Capula Investment Management and Ionic Capital Management run comparable funds.
Tail funds weren’t in excessive demand when the market stored shifting greater. But even in early 2018, some institutional buyers guess the market would ultimately crack, and added cash to Saba’s fund.
At the top of 2018, Saba’s complete belongings underneath administration have been $1.6 billion, up 25 percent from a yr earlier. Saba’s portfolios that make investments in closed-end funds, together with its Saba Capital CEF Opportunities 1 Onshore portfolio, took in $250 million in new cash late in 2018.
Here Weinstein typically flexes his activist muscle by pushing administration to take motion and shrink the reductions at which the funds commerce to their internet asset worth.
On Wall Street, Weinstein is greatest recognized for skewering JP Morgan’s so-called London Whale, when one in every of its merchants in 2012 amassed an outsized place in credit score default swaps that value the financial institution some $6 billion. CDS are sometimes seen as insurance coverage on loans, designed to guard in the case of defaults.
In 2018, Weinstein once more gained in the world of defaults by efficiently choosing the yr’s two largest — oilfield providers supplier Parker Drilling and retailer Sears Holdings Corp. In 2017, on the Robin Hood funding convention, Weinstein sounded the alarm bells on Parker Drilling, which filed for pre-arranged Chapter 11 in December.
Reporting by Svea Herbst-Bayliss; Editing by Bernadette Baum