Prime Highlights
- Weinstein stated he is buying pessimism, targeting private credit funds under pressure as investors scramble to exit their positions.
- Despite below-expectation tender results, sources close to Saba said the outcome still validated the firm’s investment thesis on private credit stress.
Key Facts
- Saba Capital Management is a New York-based hedge fund known for activist investing in closed-end funds and credit markets.
- Business development corporations lend to small and mid-sized companies with higher risk profiles that typically cannot access financing from federally insured banks.
Background
Saba Capital Management, led by Boaz Weinstein, is preparing to raise approximately $1 billion for a new investment vehicle aimed at acquiring distressed private credit funds, as pressure mounts on the broader private credit market.
The new fund marks a major expansion of Saba’s activities into both public and private business development corporations and interval funds. Though similar in structure to closed-end funds, these financial products typically offer little liquidity to their retail holders. According to Weinstein, his investment strategy is one that involves purchasing pessimism by investing in funds where the value has deteriorated due to redemptions by their holders.
The move follows a mixed outcome from Saba’s recent tender offers. Working alongside Cox Capital Partners, Saba offered to purchase up to 6.9% of shares in Blue Owl Capital’s second fund at roughly a 35% discount to net asset value, and also targeted Starwood Real Estate Income Trust. The offers expired in the last week of April, with the two firms acquiring only $10 million in combined face value across 190 trades. Nearly all came from the Starwood fund, while Blue Owl investors tendered less than 1% of shares. Blue Owl had urged its investors not to sell.
Despite the underwhelming response, sources close to Saba maintained that the results validated their broader thesis. Growing demand from wealth advisors whose clients are trapped in private funds and seeking liquidity helped drive the decision to launch the new vehicle.
Worldwide regulators are now paying more attention to private credit because major market losses have increased their scrutiny, and their expectations for returns have decreased.
