Saba Capital Joins Other Quant Hedge Funds Experiencing a Tough 2012

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Boaz Weinstein’s Saba Capital has had an under-performing third quarter and overall, a bad year so far. Saba Capital made it into the Forbes’ list of highest earning hedge fund managers for 2011, if that’s any consolation. Boaz Weinstein is famous for profiting from JPMorgan Chase & Co. (NYSE:JPM)’s trading losses, but did not have similar luck in the following months.

Saba Capital Joins Other Quant Hedge Funds Experiencing a Tough 2012

The fund has lost 0.91 percent year to date and had negative returns for Q3 2012, according to sources familiar with the matter. The net performance for the third quarter was -3.27 percent. The fund has lagged in five out nine months, and as of September 2012, the total firm assets are just above $5.3 billion. The fund’s major strategies are based on credit long/short , credit relative value, and capital structure arbitrage. Lately Saba has been making bets on collateralized loan obligations (CLO), as reported by Bloomberg news. Some consider these type of investments risky, despite higher yields and short term debt obligations.

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“Some CLOs issued before 2008 are still undervalued comparing to the underlying assets,” James Wang, a money manager at Saba in New York, told Bloomberg in an interview. Wang likes debt better than old CLOs, which “are more stable because they are short-dated” and “have relatively low volatility compared to the average CLO.”

There are a number of other hedge funds who have had a losing year so far, the common theme in their investing strategy is a quantitative, algorithm driven approach. Woodbine Capital Advisors is losing capital, as investors have pulled out their money, according to sources who spoke to ValueWalk. The total assets were down as much as $500 million earlier this year, while in its high times the fund has managed as much as $3.2 billion. The firm’s highest gain for almost two years has been a profit of +2.96 percent for the month of July 2012. Woodbine lost by 0.32 percent in August.

Other funds that implement aggressive computer driven algorithms to circle investment ideas are Hutchin Hill, BlueCrest Capital, Winton Capital, and one of Man Group’s Plc (LON:EMG) funds. Winton Capital detracted by 3.28 percent, Man Group’s AHL has fallen by 4 percent in the year so far. Hutchin Hill, which also profited off the JPMorgan Chase & Co. (NYSE:JPM) London Whale Trade, has been moderately profitable for this year.

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