“Elon Musk isn’t the only American business leader who relishes telling Brits how absolutely rubbish they are,” observed The Times in January. One New Yorker adding “his own unique contribution to the special transatlantic relationship” is Boaz Weinstein, the hedge-fund chief who has spent much of the year laying siege to seven London-listed investment trusts he dubs “the Miserable Seven”. Still, his three-month campaign hasn’t turned out quite as planned.
“I love punching a bully in the nose,” the Wall Street trader behind Saba Capital told the Financial Times. “That’s what I think I’m doing with closed-end funds.” When he landed with a bang in the UK – taking simultaneous stakes in a clutch of funds – he proposed ousting their boards, installing his own nominees and unlocking value for investors (and himself) by reducing the discount at which the shares trade relative to their assets.
It’s a familiar playbook for Weinstein, who has previously targeted some of the biggest names in American finance, including BlackRock. But he didn’t bargain on the resistance he encountered from London’s old financial guard, who were “having none of his populist pitch”, says The Wall Street Journal. Far from being viewed as a white knight, Weinstein was slammed as a “vulture”, bent on “an opportunistic land grab of a significant part of the British financial system”. Ultimately, investors in all seven funds voted overwhelmingly to kick out his proposals. “Boy, they crushed me.”
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“I didn’t realise just how clubby” the UK financial world is, says Weinstein, 52, of his defeat. But he has vowed to fight on. In fact, the former Deutsche Bank wunderkind says he takes “pride in surviving periods of bad luck or bad performance”. A chess master, he’s also a poker and blackjack high-roller, once banned from the Bellagio casino in Las Vegas for his prowess at counting cards.
As a boy growing up in a small apartment on the Upper West Side of Manhattan, he was a regular watcher of the TV show Wall Street Week, “sparking an early fascination with markets”, says The Wall Street Journal. Later, as a student at the prestigious Stuyvesant High School, Boaz won a stock picking contest. At 15, he won an internship at Merrill Lynch; at 18, “he talked his way” into a Goldman Sachs summer programme aimed at graduates.
That was the prelude to a stellar career trading complex derivatives at Deutsche Bank, where Weinstein honed an ability to profit from volatility during the 1998 Russian debt crisis and discovered a lifelong passion for exploiting price gaps, says the FT. The profits rolled in, but he was badly hit during the 2008 financial crisis, losing about $2 billion, and left the bank soon after.
How Boaz Weinstein harpooned the London Whale
Undeterred, he formed Saba Capital. In the hedge-fund game, Weinstein is known as a “monster” – an “aggressive trader with a preternatural appetite for risk and a take-no-prisoners style”, noted The New York Times in 2012. His big coup came in 2011, when he noticed that an unknown trader, later dubbed “the London Whale”, was making huge trades in an obscure corner of the credit markets, says the FT. He took the other side and “ended up harpooning” JPMorgan Chase, “which lost more than $6 billion in the fiasco”.
Today, Saba Capital oversees around $5 billion in assets. But Weinstein’s record has long split the critics. Some point to his ability to deliver steady returns, others say he was able to spot the London Whale because he is one himself – never too far from another ruinous Deutsche Bank trade. As Weinstein moves on to the second phase of his London campaign – he has filed proposals to convert four funds into open-ended funds that automatically trade at their asset values – his mettle and endurance will be tested. It goes without saying he thinks he’ll win.
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