May 18, 2016 / 6:55 PM / 3 years ago

Hedge fund Saba Capital pulls in fresh cash as returns climb in 2016

BOSTON (Reuters) - Boaz Weinstein’s hedge fund Saba Capital has been pulling in new money this year even as many rival investors are being asked to return cash to their clients.

The bulk of money went into Saba’s newly launched portfolio that invests in closed-end bond funds, a person familiar with the firm said on Tuesday.

A spokesman for the firm declined to comment.

An anchor investor wrote a $70 million check in February while other clients have put in $20 million, the person said. This leaves the six-month old Saba Capital CEF Opportunities fund with $100 million in assets.

Indeed all of Saba’s portfolios have seen fresh demand this year as returns are in the double digits. Assets have grown by $400 million over the last 12 months, putting the firm’s total assets at $1.8 billion, the person said.

The inflows come at a time the hedge fund industry is facing its biggest wave of redemptions since the financial crisis. Research firm eVestment said on Wednesday that $17.7 billion in assets have been pulled out of the $2.8 trillion industry in the first quarter.

To be sure Saba’s assets are still far below its roughly $6 billion peak, reached in 2012 after Weinstein, and other hedge funds, took the opposite side of JP Morgan’s so-called London Whale Trade which cost the bank some $6 billion.

But after three down years, Weinstein’s Saba Capital performance looks to be making a comeback. In 2015, Saba gained some 3 percent when the average fund was losing money and this year returns are even better.

The new fund is up nearly 11 percent through early May while the Saba Capital Master fund is up nearly 14 percent, the person familiar with the performance said.

Weinstein, who spoke on a panel at the SkyBridge Alternatives Conference in Las Vegas last week, said he is seeing the best capital structure arbitrage opportunities since 2002. Specifically, Weinstein has been betting on battered energy company bonds while also betting against their stock.

Weinstein also got some good news this week when a New York Supreme Court judge threw out a Canadian pension fund’s third claim that Saba had breached its fiduciary duty. Canada’s Public Sector Pension Investment Board last year sued Saba, saying the fund and Weinstein had marked down some assets after the pension asked for money back.

Reporting by Svea Herbst-Bayliss; Editing by Diane Craft

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