BOSTON (Reuters) – Saba Capital's Tail Hedge Master Fund, which promises a kind of apocalyptic insurance with high-performing bets when the markets are flying, finished in 2018 with a 25% gain, said Tuesday a person aware of the fund's returns.
FILE PHOTO: Boaz Weinstein, founder and chief investment officer at Saba Capital Management, speaks at the SALT conference in Las Vegas, Nevada, USA on May 17, 2017. REUTERS / Richard Brian
For years, Boaz Weinstein, founder of the hedge fund based in New York ten years ago, was convinced that volatility would return to the markets even as data showed that market conditions in early 2018 were among the most stable for more than forty years.
At the end of the year, markets had almost fallen on the bear market (defined as a 20% drop from the top) and the Weinstein fund, designed to protect investors from unexpected events, jumped.
The company's flagship fund, Saba Capital Master Fund, also performed well, up 11.1%.
A spokeswoman for Saba declined to comment.
In December, when the average hedge fund lost money due to the collapse of the markets, the Tail Hedge master fund gained nearly 20%, said the manager.
The Saba Reserve Fund is one of the few portfolios to rely on the definition of risk of loss, which describes the times when larger-than-normal shocks occur. Capula Investment Management and Ionic Capital Management manage similar funds.
Alternative funds were not in high demand when the market continued to grow. But even in early 2018, some institutional investors have bet that the market will eventually crack and have added money to the Saba fund.
At the end of 2018, Saba's total assets under management were $ 1.6 billion, up 25% from a year earlier. Saba's portfolios investing in closed-end funds, including its Saba Capital CEF Opportunities 1 Onshore portfolio, received $ 250 million in new money at the end of 2018.
In this case, Weinstein is often very dynamic in urging management to take action and reduce the discounts the funds are trading to reach their net asset value.
On Wall Street, Weinstein is best known for his role as "London Whale", one of JP Morgan's traders, who accumulated a disastrous credit default position in 2012 that cost the bank about $ 6 billion. CDSs are often seen as insurance on loans designed to protect against default.
In 2018, Weinstein again won the world's faults by successfully selecting the two largest oilfield service providers Parker Drilling and retailer Sears Holdings Corp. In 2017, at Robin Hood's investment conference, Weinstein fired the alarm on Parker Drilling, who filed for Chapter 11 pre-arranged in December.
Svea Herbst-Bayliss report; Edited by Bernadette Baum