Weinstein's Saba Capital Under Fire for Allegedly 'Mispricing' Assets Prior to Redemption

D

dealmaker

Sep 25 2015 | 8:12pm ET

Boaz Weinstein’s Saba Capital Management has been accused by the Canadian Public Sector Pension Investment Board (PSPIB) of manipulating the value of its portfolio before paying out a redemption request.

The PSPIB invests primarily for retired Canadian military, police officers and public service employees.

The allegations, contained in a lawsuit filed Friday in New York State Supreme Court, contend Saba lowered the value of its portfolio before paying out the PSPIB’s redemption, then marked it back up again shortly afterwards.

PSPIB invested approximately $500 million into Saba’s offshore fund in 2012 and 2013, according to The Wall Street Journal. However, the $112 billion public pension fund began to lose confidence about a year ago and asked for its money back earlier this year.

Under additional pressure from other redemptions, Saba allegedly marked down the value of certain bonds in its portfolio using lowball bids instead of external pricing sources, then abruptly marked them back up again one month later, according to the lawsuit. The result, alleges PSPIB, was a material loss on its investment in the fund.

New York-based Saba was founded by Weinstein, the former co-head of Deutsche Bank’s credit trading business, in April of 2009. It started out well, booking gains in 2010 and 2011, but has faced headwinds since, losing 3.9% in 2012, 6.8% in 2013 and 11% in 2014, according to Bloomberg.

Accordingly, assets have fallen from a peak of around $5.5 billion in 2013 to $1.6 billion now, although the fund has gained approximately 6% so far this year.
 
Lost money for 3 years straight and still had over a billion in AUM, a good CV and smooth pitch really do wonders.
 
Investors lost at least 21.7% (non-compounded loss) staying with his fund for the 3 years from 2012 to 2014, at a time when the stock market has been going virtually straight up.
 
The pension fund had less than 0.5% of their assets in this fund. They needed diversification from their no doubt large allocation of long only equity and bond asset managers.
 
d08 said:
Lost money for 3 years straight and still had over a billion in AUM, a good CV and smooth pitch really do wonders.
More...

David Tepper had said the only reason Boaz Weinstein was hired as an intern at Goldman Sachs was to play chess...
 
Boaz Weinstein Vows To Continue Fight Against Canada
By Mani on November 2, 2015 in Business

Blame Canada.

Hedge fund manager Boaz Weinstein has vowed to fight Canada’s Public Sector Pension Investment Board despite the two sides being ordered to have a third party to mediate their dispute earlier in October.

A Canadian pension fund has filed a suit that could limit the hedge fund’s ability to raise capital, as the 42-year old Weinstein seeks to rebuild his business.


Via Hedge Weekly
Saba Capital sued by Canadian pension fund
As outlined by ValueWalk, Montreal-based Canada’s Public Sector Pension Investment Board sued Saba Capital Management last September alleging that the hedge fund reduced the value of its portfolio just before paying out the redemption request, then increased the fund’s value again after the money was paid out.

The Canada pension fund, which oversees the retirement savings of Canadian federal employees, stated that it had invested $500 million in 2012 and 2013, making it the largest investor in Saba Offshore Feeder Fund, before making a redemption request in January 2015. According to its website, as of March 31, Canada pension fund had $112 billion of assets under management.

In early October, under a New York start court pilot program, the two sides were ordered to have a third party mediate the dispute.

However, on October 28, the parties agreed to opt out of mediation, stating it would be “ineffective at this stage of proceedings”.


Boaz Weinstein asked the judge to dismiss the case the day after mediation was ordered, saying the pension fund “recklessly and maliciously attacked” his firm, which did “absolutely nothing wrong” and won’t settle the case for a penny.

Boaz Weinstein vows to fight to the end
The Canadian pension fund accused the hedge fund of manipulating the value of its investment in McClatchy Co. bonds. Weinstein has vowed to fight the suit and has stated in a filing that he seeks dismissal of the lawsuit. In his filing, Weinstein said the firm has the discretion to determine the net asset value of its investment in bonds. The hedge fund manager also pointed out that investors were told the firm was allowed to value securities as it “reasonably determines.” He also mentioned that the pension fund didn’t cite any specific breach of contract in its complaint.

Boaz Weinstein’s business which once managed $5.5 billion has already been hit by a 20% loss from the beginning of 2012 through last year, which in turn led to clients pull out billions. The redemptions brought down the assets under management to $1.5 billion this year from its all-time high of $5.5 billion two years ago.

As detailed by ValueWalk, three long-term executives left Saba Capital Management earlier this year. Paul Andriori, George Pan and Ken Weiller were part of the management team of Saba Capital Management when the hedge fund started its operations. Andriorio previously worked at Goldman Sachs, Pan at JPMorgan and Weiller at SAC Capital Advisors.
 
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