Investor Sentiment Readings — Barron's

By Caitlin McCabe

As a star trader at Deutsche Bank, Boaz Weinstein suffered sharp losses in the financial crisis. Then he set off on his own to create hedge fund Saba Capital. He's known for helping to bring down the "London whale," a trader who lost more than $6 billion for JPMorgan Chase, and for presciently positioning for the Covid-19 market mayhem.

Now he's facing one of his biggest fights ever, and it isn't going well.

For two months, the New York hedge-fund manager has waged a public battle to shake up the underperforming, 150-year-old U.K. investment-trust industry, which oversees more than $300 billion in assets. The activist has tried to largely apply a playbook he's used in the U.S. before. He proposed to oust the trusts' boards, install his own nominees, change their strategies and make money by reducing the discount at which the funds trade relative to their assets.

But London's old financial guard is having none of his populist pitch for unlocking value for everyday investors, which they see as an opportunistic land grab of a significant part of the British financial system. The Mail on Sunday, a British tabloid, branded him a "ruthless corporate raider."

"My mother used to say, 'You have to bounce back,'" Weinstein said in an interview in London. "I have taken amazing pride in surviving and handling disappointing periods of bad luck or bad performance or bad skill."

Shareholders in all seven of the investment trusts he targeted have turned out in droves to overwhelmingly vote against him. He's now moving on to the second phase of his battle, because the 51-year-old chess ace has no intention of backing down.

"I've never had this happen before," he said of his defeat so far. "I didn't realize just how clubby" the U.K. financial world is.

Weinstein was raised in a Jewish family in a small Manhattan apartment, initially sharing a room with his older sister divided by bookcases. Their father owned an insurance brokerage and their mother ran the household, helping with the business, enrolling the kids in after-school classes and frequently clipping out articles for them to read. She immigrated to the U.S. decades after her parents hid her with a Polish family to help her survive World War II.

Weinstein joined his parents in watching "Wall Street Week With Louis Rukeyser" on PBS, sparking an early fascination with markets. Later, at the prestigious Stuyvesant High School, Weinstein won a stock-picking contest, outperforming 5,000 other students.

"The grit that helped my mom survive the war and then come to this country, and for the two [of my parents] to make their way without much, it instilled in us grit and persistence and not taking no for an answer, " said Weinstein's sister, Ilana D. Weinstein, who works as a headhunter for top hedge-fund firms as chief executive of the IDW Group.

As Weinstein tells it, his deep voice helped him land a Merrill Lynch internship at 15, during which he made calls after school and in the summer to set up sales-pitch appointments. At 18, he talked his way into a Goldman Sachs summer program intended for graduate students after connecting with a Goldman partner over their shared love of chess. While at the firm, he learned blackjack and how to count cards — a skill that would eventually lead to him being banned from the Bellagio casino in Las Vegas.

Weinstein joined Deutsche Bank a few years later, just as the market for complex credit derivatives was taking off. Before long, his proprietary-trading team — called Saba, a Hebrew word meaning "grandfather" — was raking in profits. Then the financial crisis shook markets. His team suffered losses of $1.8 billion, or roughly 18% of its capital, in 2008.

The next year, Weinstein launched his own hedge fund, naming it Saba Capital, focusing initially on credit trading and a "tail" fund that is expected to profit in down markets.

In 2011, Weinstein scored a big break, noticing unusual moves in an obscure corner of the credit markets. Behind the scenes, a JPMorgan trader was making huge trades on an index tracking insurance-like products called credit-default swaps. Weinstein pounced, taking the opposite side.

The "London whale" ultimately saddled JPMorgan with $6.2 billion in losses and hefty payouts to regulators. Weinstein, meanwhile, earned several hundreds of millions of dollars in profits.

The pandemic brought another windfall. In 2020, Saba's master fund earned a 73% return, while the tail fund returned 63%.

"Finding mispricings and understanding why they are there, and unraveling the puzzle, is the thing that gives me the most joy," Weinstein said. Today, his fund oversees $5.7 billion in assets.

The battle against U.K. investment trusts began in December, when Weinstein unveiled huge stakes in seven trusts, attacking their performance records and steep valuation discounts. The trusts are a sort of closed-end mutual fund with a set number of shares that can't be redeemed and instead trade on an exchange like stocks. That means that when demand for a trust wanes, its share price can slip below the net value of the fund's assets.

Weinstein has long targeted these types of funds as a trading strategy at Saba, jostling firms to narrow those discounts. In the U.K., he initially planned to oust the boards, offer "trapped" investors a way to exit and then enact other measures, like changing the trusts' investment strategies. He has had success against U.S. giants, most recently reaching a settlement with BlackRock that included the asset manager agreeing to buy back shares in two large closed-end funds.

The Edinburgh Worldwide Investment Trust, one of Weinstein's British targets, rolled out a #StopSaba campaign on social media. Independent proxy adviser Glass Lewis recommended voting against Saba Capital's proposal. Karen Brade, the chair of another Weinstein target, Keystone Positive Change Investment Trust, urged shareholders to be wary of Saba's "vague and theatrical promises — this is no knight in shining armour."

Weinstein was also targeted by the British press. "Saba is not a saviour of UK investment trusts," read one headline atop a piece in the Guardian. "Don't let a ruthless US fund manager destroy your trust," said another in the Mail on Sunday.

The first investment trust launched in 1868, when Queen Victoria reigned over Britain, as a way to give regular investors exposure to a diversified portfolio. Advocates for investment trusts say they offer ordinary investors access to a range of assets, including private investments like SpaceX or other illiquid assets like renewable-energy infrastructure or real estate. Investment trusts can borrow to magnify returns and often pay dividends.

But markets have vastly changed in recent decades, with the rise of cheaper products like exchange-traded funds.

According to Weinstein, the seven funds he initially targeted — the Miserable Seven, as he calls them — had traded at discounts ranging from 12% to nearly 15% on average over three years. Industry advocates and analysts argue that many investors in British trusts take longer-term views, making them less concerned about swings in prices.

"People that invest in investment trusts, both professional and retail investors, are big fans of the structure and the sector as a whole," said Emma Bird, head of investment-trust research at Winterflood Securities. "I think they viewed Saba and their approach as threatening that whole ecosystem."

With the first six of Weinstein's U.K. targets, fewer than 2% of the funds' shareholders who cast ballots voted in line with Saba's plan to install its handpicked board nominees.

This week, Weinstein unleashed his second phase, a fresh campaign in the U.K. that includes two new trusts. This time, he's no longer after board control, but wants to convert the trusts into open-ended funds. He says that would help investors who currently can't exit their investments at fair value.

Saba has bought up $2.7 billion of U.K. investment trusts, including some holdings in funds that Weinstein isn't actively campaigning against. He said he has started talking to those managers about how to improve performance.

His U.K. strategy is profitable, said a person familiar with the matter.

And Saba's clients are eager to get a piece of his closed-end fund strategy, Weinstein said. Last month, his fund focused on these types of trades brought in its largest monthly in-flow ever.

"I'm not going anywhere," Weinstein said.

Write to Caitlin McCabe at caitlin.mccabe@wsj.com

                                  High        Low      Close     Change 
                                  ----        ---      -----     ------ 
  S&P SmallCap 600 Index      1,443.31   1,427.46   1,429.84      -2.29 
  S&P MidCap 400 Index        3,219.72   3,193.80   3,198.61      -2.46 
  S&P 100 Index               2,997.21   2,987.99   2,994.41       2.75 
  S&P 500 Index               6,127.47   6,107.62   6,114.63      -0.44 
 
 
Source: FactSet 
 

                                  High        Low      Close     Change 
                                  ----        ---      -----     ------ 
  S&P SmallCap 600 Index      1,443.31   1,427.46   1,429.84      -2.29 
  S&P MidCap 400 Index        3,219.72   3,193.80   3,198.61      -2.46 
  S&P 100 Index               2,997.21   2,987.99   2,994.41       2.75 
  S&P 500 Index               6,127.47   6,107.62   6,114.63      -0.44 
 
 
Source: FactSet 
 

The WSJ Dollar Index is down 0.90 point or 0.88% this week to 101.12

• Largest one-week point and percentage decline since the week ending Jan. 24, 2025
• Down for two consecutive weeks
• Down 1.39 points or 1.36% over the last two weeks
• Largest two-week point and percentage decline since the week ending Jan. 24, 2025
• Down four of the past five weeks
• Today it is down 0.28 point or 0.27%
• Down for two consecutive trading days
• Down 1.10 points or 1.07% over the last two trading days
• Largest two-day point and percentage decline since Monday, Aug. 19, 2024
• Down three of the past four trading days
• Off 3.83% from its record close of 105.14 hit Tuesday, Sept. 27, 2022
• Lowest closing value since Thursday, Dec. 12, 2024
• Off 2.40% from its 52-week high of 103.61 hit Friday, Jan. 10, 2025
• Up 6.10% from its 52-week low of 95.31 hit Friday, Sept. 27, 2024
• Rose 2.60% from 52 weeks ago
• Month-to-date it is down 1.36%
• Year-to-date it is down 1.64 points or 1.59%

Data based on 5 p.m. ET values

Source: Tullett Prebon and Dow Jones Market Data

The S&P MERVAL Index is down 28996.02 points or 1.20% this week to 2387385.73

• Down for three consecutive weeks
• Down 178696.49 points or 6.96% over the last three weeks
• Largest three-week point and percentage decline since the week ending Jan. 31, 2025
• Down four of the past five weeks
• Today it is up 33642.05 points or 1.43%
• Up for three consecutive trading days
• Up 113817.74 points or 5.01% over the last three trading days
• Largest three-day point and percentage gain since Friday, Jan. 31, 2025
• Off 15.63% from its record close of 2829730.44 hit Thursday, Jan. 9, 2025
• Today's closing value is the fourth lowest this year
• Off 15.63% from its 52-week high of 2829730.44 hit Thursday, Jan. 9, 2025
• Up 149.26% from its 52-week low of 957777.50 hit Monday, March 11, 2024
• Rose 124.09% from 52 weeks ago
• Off 15.63% from its 2025 closing high of 2829730.44 hit Thursday, Jan 9, 2025
• Up 5.01% from its 2025 closing low of 2273567.99 hit Tuesday, Feb 11, 2025
• Month-to-date it is down 6.91%
• Year-to-date it is down 146248.92 points or 5.77%

Source: Dow Jones Market Data, FactSet

The IPC Indice de Precios Y Cotizaciones is up 1260.19 points or 2.39% this week to 54077.94

• Up for two consecutive weeks
• Up 2868.41 points or 5.60% over the last two weeks
• Largest two-week point gain since the week ending Dec. 22, 2023
• Largest two-week percentage gain since the week ending Dec. 15, 2023
• Up five of the past six weeks
• Today it is down 82.17 points or 0.15%
• Largest one-day point and percentage decline since Wednesday, Feb. 5, 2025
• Snaps a six-trading-day winning streak
• Off 7.89% from its record close of 58711.87 hit Wednesday, Feb. 7, 2024
• Today's closing value is the second highest this year
• Off 6.91% from its 52-week high of 58092.44 hit Friday, April 5, 2024
• Up 10.73% from its 52-week low of 48837.72 hit Monday, Dec. 30, 2024
• Down 5.35% from 52 weeks ago
• Off 0.15% from its 2025 closing high of 54160.11 hit Thursday, Feb 13, 2025
• Up 10.46% from its 2025 closing low of 48957.24 hit Friday, Jan. 3, 2025
• Month-to-date it is up 5.60%
• Year-to-date it is up 4564.67 points or 9.22%

Source: Dow Jones Market Data, FactSet