By Svea Herbst-Bayliss and Isla Binnie
NEW YORK, April 27 (Reuters) – Boaz Weinstein’s Saba Capital Management plans to raise cash for a new investment vehicle designed to buy up souring private credit funds, according to people familiar with the matter.
Saba hopes to raise roughly $1 billion over the coming weeks, two people familiar with the effort told Reuters. Weinstein wants to buy up funds whose values have come under pressure as investors clamor to get their money out, one of the people said. The amount Saba plans to raise has not previously been reported.
Saba said the fresh fund will mark a significant expansion of its investment activities into both public and private business development corporations and interval funds – products that share the structural DNA of closed-end funds but have historically offered retail investors few opportunities to cash out their investments.
Private credit is coming under increasing scrutiny from policymakers and regulators as high-profile losses jolt markets, and expectations of future returns start to sag.
Weinstein has said in interviews he is “buying pessimism.”
The decision, first reported by Reuters, comes only days after Saba and Cox received a lukewarm reception to their offer to buy out funds at Blue Owl Capital and Starwood Real Estate Income Trust at a steep discount. The tender offers expired at the end of last week.
Saba and Cox completed tender offers for Starwood Real Estate Income Trust and Blue Owl Capital (Blue Owl II), acquiring $10 million in aggregate face value across 190 separate trades.
Substantially all came from the Starwood REIT while investors in the Blue Owl fund tendered less than 1% of shares, one of the people and another person familiar with the matter told Reuters.
Representatives for Blue Owl and Starwood did not immediately respond to requests for comment.
Blue Owl urged its investors against selling.
Demand among wealth advisors whose clients are stuck in private BDCs and interval funds and want liquidity helped fuel Weinstein’s decision to raise the new vehicle. BDCs raise money from investors to lend money to small- and mid-sized companies, much like a bank. They come with less protection for investors and tend to lend to riskier companies that generally cannot get financing from a federally insured bank.
Saba alongside Cox Capital Partners offered to buy up to 6.9% of shares in Blue Owl Corp II at a roughly 35% discount to net asset value.
Weinstein, a prominent investor who won a bet against a JPMorgan Chase trader known as the London Whale, has argued that private credit is facing significant stress and investors are seeking a way to exit.
Sources close to Saba have acknowledged that the aggregate volume of tenders was below initial expectations, but they said Saba still views the results as a meaningful validation of its thesis.
(Reporting by Svea Herbst-Bayliss in Boston and Isla Binnie in New York ; Editing by Dawn Kopecki, Chris Reese, Chizu Nomiyama and David Gregorio)
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