WEBVTT - Saba Capital Management Founder, CIO Talks Closed-End Fund Arbitrage 0:00:01.000 --> 0:00:03.800 You might have known boas Weinstein back in the day 0:00:04.080 --> 0:00:07.680 for taking on the JP Morgan London whale, And of 0:00:07.720 --> 0:00:10.200 course he's been known for many many years out of 0:00:10.440 --> 0:00:13.000 the credit world because of course he invests in very 0:00:13.000 --> 0:00:17.239 complicated credit assets. But more recently he's been known as 0:00:17.239 --> 0:00:20.840 an activist investor. You have been most recently after for 0:00:20.880 --> 0:00:24.160 a while targeting a series of clothes down funds, very 0:00:24.360 --> 0:00:27.920 let's say, aggressively going after Black Rock. There have been lawsuits, 0:00:28.160 --> 0:00:30.880 and of course proxy battles. Were actually in the center 0:00:31.040 --> 0:00:35.080 of a proxy battle right now with certain funds actually 0:00:35.240 --> 0:00:38.280 have already been voted on over the last couple of weeks. 0:00:38.840 --> 0:00:42.080 What we don't know and what is a very important thing. 0:00:42.159 --> 0:00:45.640 You've been very vocal on Twitter usually on how these 0:00:45.840 --> 0:00:50.640 battles are going. You've been pretty quiet. How have the 0:00:50.680 --> 0:00:52.360 meetings gone? Have you won anything? 0:00:52.920 --> 0:00:56.279 So it's always nice to aspire to break news. 0:00:56.080 --> 0:00:58.200 On at a conference like this, and it so happens 0:00:58.600 --> 0:01:00.720 that the fund that has gotten the most most of my. 0:01:00.680 --> 0:01:02.120 Attention, which is called big Z. 0:01:02.280 --> 0:01:06.240 BIGZ, just had the voting closed at eleven o'clock. So 0:01:06.280 --> 0:01:09.360 I can say preliminarily I didn't count the votes, but 0:01:09.400 --> 0:01:12.560 they've announced it that actually all the Sauba nominees there 0:01:12.600 --> 0:01:15.760 were seven got more votes than all of the Blackrock nominees, 0:01:16.040 --> 0:01:19.080 and four of our nominees got more than two times 0:01:19.120 --> 0:01:21.120 as many votes as black Rock, so more than two 0:01:21.120 --> 0:01:23.600 to one. And when you win an election by two 0:01:23.680 --> 0:01:26.240 to one, the voters have spoken. You know, we all 0:01:26.240 --> 0:01:29.440 know landslide is like sixty forty fifty eight to forty two. 0:01:29.520 --> 0:01:32.039 If more than two thirds voted one way, you know, 0:01:32.080 --> 0:01:35.280 Blackrock can no longer say and that they purport to 0:01:35.280 --> 0:01:37.760 speak for the shareholder and try to create some divisions. 0:01:37.760 --> 0:01:41.040 The shareholder is spoken, we won, and what we The 0:01:41.080 --> 0:01:44.160 reason that there's been litigation, it's been outward. It's us 0:01:44.200 --> 0:01:46.600 to them is because they have put in place election 0:01:46.720 --> 0:01:49.120 rules that would make Vladimir Putin blush. 0:01:50.720 --> 0:01:54.240 So let's step back, big step back. This is one 0:01:54.320 --> 0:01:57.320 fund you said you will voting for today, but they're 0:01:57.320 --> 0:02:00.280 ten funds. Ultimately, what is it that you want want 0:02:00.400 --> 0:02:02.640 out of this strategy? These are closed in funds, so 0:02:02.680 --> 0:02:05.520 you're locking up or Blackrock has locked up capital for 0:02:05.640 --> 0:02:08.320 a longer period of time forever right in many of 0:02:08.320 --> 0:02:11.280 these funds. So what is it that you're trying to 0:02:11.320 --> 0:02:14.360 accomplish by targeting them. I understand that you target them 0:02:14.560 --> 0:02:17.160 when they're trading below their net asset value. You want 0:02:17.200 --> 0:02:21.239 them to bring investors whole. But what's the endgame here? 0:02:21.320 --> 0:02:23.680 You won at one fund, what else do you want? 0:02:23.919 --> 0:02:24.239 Yeah? 0:02:24.280 --> 0:02:26.920 So ETFs, as we all know, can be sold in 0:02:26.960 --> 0:02:29.639 net acid value, or the market maker can redeem them 0:02:29.639 --> 0:02:32.400 for net asset value, and then the manager Blackrock will 0:02:32.400 --> 0:02:34.960 go instell the assets and give back net asset value. 0:02:35.080 --> 0:02:37.880 Closed in funds, you're trapped. Many of these funds have 0:02:37.919 --> 0:02:39.880 no maturity. They could be around for one hundred years, 0:02:40.120 --> 0:02:42.920 two hundred years, and so there are periods where the 0:02:42.960 --> 0:02:46.160 investors don't want them. And for some reason, there isn't 0:02:46.160 --> 0:02:49.240 a manager more than Blackrock that the investors don't want. 0:02:49.280 --> 0:02:52.359 It's something personal. I'm not looking to not be besties 0:02:52.360 --> 0:02:54.160 with Larry Fink. I'm not looking to be besties with 0:02:54.240 --> 0:02:54.639 Larry Fink. 0:02:54.680 --> 0:02:54.800 You know. 0:02:54.919 --> 0:02:58.040 I basically am just looking to make my investors money. 0:02:58.080 --> 0:03:01.160 And if the discounts are persons, and they're there year 0:03:01.200 --> 0:03:03.200 after year, and you can buy it a literal dollar 0:03:03.240 --> 0:03:06.240 for eighty five cents, you have the power, unlike in 0:03:06.280 --> 0:03:09.400 normal activism, to turn that back into a dollar, because 0:03:09.440 --> 0:03:12.000 if you change the fund structure to being an open 0:03:12.320 --> 0:03:14.680 fund like an ETF or a mutual fund, or the 0:03:14.720 --> 0:03:17.920 manager agrees to buy back shares a net asset value, 0:03:18.000 --> 0:03:22.040 just like Franklin Templeton did this month in three energy funds, 0:03:22.400 --> 0:03:24.720 the investor has a chance to go from eighty five 0:03:24.760 --> 0:03:26.880 to one hundred. And as you all know, that's not 0:03:26.960 --> 0:03:29.560 even just fifteen percent, because it's fifteen over eighty five. 0:03:29.600 --> 0:03:31.000 That's an eighteen percent return. 0:03:31.320 --> 0:03:34.679 Big Z today is at greater than a fifteen percent discount, 0:03:34.720 --> 0:03:38.080 and it's a fund that lit its investors' money on fire. 0:03:38.200 --> 0:03:40.680 Now I say that it sounds dramatic. The last three 0:03:40.760 --> 0:03:43.520 years we've been in more or lessible market, not for everything, 0:03:43.840 --> 0:03:47.240 but Big Z has lost more than fifty percent of 0:03:47.320 --> 0:03:51.600 its capital from the stock prices going down and from 0:03:51.600 --> 0:03:54.760 the discounts going up, and so it's lost billions of dollars. 0:03:55.000 --> 0:03:59.000 And here we have investors resoundingly saying we want change 0:03:59.040 --> 0:04:01.280 at the board level. But the part that many of 0:04:01.320 --> 0:04:03.160 you would be shocked to hear. Why I mentioned that 0:04:03.240 --> 0:04:06.920 quip about Putin is that they've decided to set election 0:04:07.120 --> 0:04:09.880 rules such that in order to replace their board, you 0:04:09.920 --> 0:04:13.120 have to actually get fifty percent of all the shares 0:04:13.360 --> 0:04:16.240 now in big z preliminarily they got about fifty one 0:04:16.360 --> 0:04:18.359 to vote, so we would have needed fifty out of 0:04:18.400 --> 0:04:22.760 fifty one. Okay, winning thirty five to fifteen wasn't good enough, 0:04:23.120 --> 0:04:25.839 and so that kind of math makes it literally impossible. 0:04:25.839 --> 0:04:28.920 But ironically it makes it impossible for them to put 0:04:28.960 --> 0:04:31.120 anyone else on the board because they would have to 0:04:31.120 --> 0:04:33.960 go through their own arcane rules. And so as a 0:04:33.960 --> 0:04:37.360 result to the black Rock nominees each sit on approximately 0:04:37.440 --> 0:04:40.599 seventy boards, seventy different boards. How can they do their 0:04:40.680 --> 0:04:43.839 job at seventy boards At JP Morgan, each nominee sits 0:04:43.880 --> 0:04:47.480 on one board. It's horrific governance from a firm that's 0:04:47.520 --> 0:04:50.839 an incredible firm that actually prides itself in raising money 0:04:50.960 --> 0:04:52.279 to invest in good governance. 0:04:52.400 --> 0:04:55.080 Now, I think importantly, as we've mentioned, this is one 0:04:55.120 --> 0:04:57.159 fund that you know the outcome far. Yes, it's a 0:04:57.160 --> 0:04:59.960 big fund for you to be investing in a large discount, 0:05:00.279 --> 0:05:02.240 But what about the rest of them? If you were 0:05:02.279 --> 0:05:06.000 to be on course to lose, how would you react? Right? 0:05:06.200 --> 0:05:07.640 Know anything about those votes? 0:05:07.880 --> 0:05:08.080 Right? 0:05:08.120 --> 0:05:09.960 So I can't announce what's going to happen for the 0:05:10.000 --> 0:05:13.359 other big funds. Big Z is something like a billion seven. 0:05:13.360 --> 0:05:16.040 It's really large, and that's also why this has captivated 0:05:16.080 --> 0:05:18.920 the media's attention and also individual investors. There's a lot 0:05:18.960 --> 0:05:21.640 of money at stake. Going to NAV just a few 0:05:21.640 --> 0:05:24.040 weeks ago was worth one point four billion dollars to 0:05:24.279 --> 0:05:27.039 mostly mom and pop investors and to our investors who. 0:05:26.880 --> 0:05:27.839 Include mom and pop. 0:05:27.880 --> 0:05:30.599 We manage money in these very strategies for three different 0:05:30.600 --> 0:05:36.680 state pensions millions of pensioneers. So the results are in 0:05:36.760 --> 0:05:39.240 limbo even if we win, because it depends what the 0:05:39.360 --> 0:05:41.840 judge says. We've taken them to court this year for 0:05:43.000 --> 0:05:46.160 this election, this election scheme, and last year we did 0:05:46.160 --> 0:05:48.159 it for a different election scheme, and we won in 0:05:48.240 --> 0:05:51.400 summary judgment against Blackrock against Neuveen, and I have a 0:05:51.440 --> 0:05:54.200 lot of respect for our former our panelist from the 0:05:54.279 --> 0:05:57.360 last session from New Veene, but it's Blackrock, to be fair, 0:05:57.480 --> 0:05:59.200 is not the only one, but they are by far 0:05:59.240 --> 0:06:02.560 the worst. And it's those legal victories that have helped 0:06:02.640 --> 0:06:06.280 us in order to get good results with other managers 0:06:06.520 --> 0:06:08.159 who don't want to be on the wrong side of 0:06:08.160 --> 0:06:08.479 the law. 0:06:08.560 --> 0:06:10.000 And so that's why this year. 0:06:10.080 --> 0:06:13.000 I was very proud that we won Institutional Investor Activist 0:06:13.080 --> 0:06:15.719 of the Year back to back years and no closed 0:06:15.720 --> 0:06:17.520 in fund activist has ever won it before, and we 0:06:17.560 --> 0:06:20.760 were voted the best activists according to Institutional You're. 0:06:20.680 --> 0:06:23.400 No longer just a closed end fund activist. You're also 0:06:23.440 --> 0:06:25.920 a close and fund manager, given that you've taken over 0:06:25.960 --> 0:06:29.400 some funds and those funds are actually not trading at 0:06:29.440 --> 0:06:33.720 asset value. So how then do you turn around and 0:06:34.200 --> 0:06:37.720 attack black Rock when your own funds are trading at 0:06:37.760 --> 0:06:38.360 a discount. 0:06:38.600 --> 0:06:42.160 So firstly, there's two measures. Let's say there's how they performed. 0:06:42.520 --> 0:06:44.839 How much money did investors make or lose? In not 0:06:44.960 --> 0:06:46.719 you mentioned there's a lot of Blackrock funds where we 0:06:46.760 --> 0:06:49.400 went after There are ten, nine of them the last 0:06:49.400 --> 0:06:52.720 three years have lost investors money. Nine out of ten. 0:06:52.760 --> 0:06:54.520 Think about the market we're in, where the SMP is, 0:06:54.520 --> 0:06:56.800 even where the Russell is. Nine out of ten are 0:06:56.880 --> 0:06:59.520 in the red our fund that we've been managing for 0:06:59.560 --> 0:07:02.960 two and a half years. That fund has actually made 0:07:03.040 --> 0:07:04.800 quite a bit of money, and in twenty twenty two, 0:07:04.839 --> 0:07:07.080 the first year we managed it, it was ranked number 0:07:07.080 --> 0:07:09.720 one out of two hundred and fifty seven funds. Who's 0:07:09.800 --> 0:07:13.240 in where the motive was income income based funds, and 0:07:13.280 --> 0:07:16.000 we were We came in first. So Blackrock can say, well, 0:07:16.000 --> 0:07:17.920 their fund trades at a discount too. But what they 0:07:18.000 --> 0:07:21.320 leave aside, this is the rub sonali, is that we 0:07:21.440 --> 0:07:24.120 when we took it over, said to the investors, if 0:07:24.120 --> 0:07:25.920 you want to get out at any V or close 0:07:25.960 --> 0:07:27.760 to any V, we will let you. We conducted a 0:07:27.840 --> 0:07:30.280 tender and then there was there were more people that 0:07:30.320 --> 0:07:32.280 wanted to get out, kind of like you know, looking 0:07:32.280 --> 0:07:34.440 at it from capturing that discount, and we did a 0:07:34.520 --> 0:07:37.800 second tender, so we let investors out of forty five percent. 0:07:38.640 --> 0:07:41.000 Forty five percent of the capital exited and we let 0:07:41.000 --> 0:07:43.640 them out of anyv Blackrock is not willing to do 0:07:43.680 --> 0:07:44.400 anything like that. 0:07:44.520 --> 0:07:46.920 One critique I've heard you make is the idea of 0:07:46.960 --> 0:07:51.720 lowering fees here to attract more investment. But for these funds, 0:07:51.760 --> 0:07:54.560 they tend to run at higher fees in the ETF structure. 0:07:54.760 --> 0:07:57.280 Would you consider lowering fees for your own funds? 0:07:57.480 --> 0:07:57.680 Right? 0:07:57.800 --> 0:08:00.160 So, our fund that we took over in January, the 0:08:00.160 --> 0:08:03.080 tickers SABA, is one of the lowest fee funds in 0:08:03.360 --> 0:08:06.440 the marketplace. It only charges seventy five basis points. The 0:08:06.520 --> 0:08:09.320 other funds is more normal. It charges around right around 0:08:09.320 --> 0:08:11.440 one percent, but it's also you get what you pay for, 0:08:11.680 --> 0:08:14.160 you know. I think most investors appreciate that if the 0:08:14.160 --> 0:08:16.800 fund is going to do interesting things. You mentioned Preditor 0:08:17.000 --> 0:08:19.280 of Wizardry or whatever you said in the beginning, and 0:08:19.600 --> 0:08:21.960 we are doing really neat things in those funds. We're 0:08:21.960 --> 0:08:24.920 not just putting together a long portfolio and letting it sit. 0:08:25.200 --> 0:08:28.000 And so I think our fees are actually very modest. 0:08:29.120 --> 0:08:30.760 It's not for me to say, it's for the investors 0:08:30.760 --> 0:08:31.560 to say, when you look at. 0:08:31.520 --> 0:08:34.160 What you're getting now, I want to read you Blackrock statement, 0:08:34.200 --> 0:08:35.960 because of course they have fought back. They have not 0:08:36.080 --> 0:08:39.360 let you jes attize their funds. They said that Blackrock 0:08:39.400 --> 0:08:41.880 and the funds boards remained focused on delivering value for 0:08:41.960 --> 0:08:45.640 all shareholders through concrete actions such as increased distributions and 0:08:45.679 --> 0:08:49.200 discount management programs. SABA is an activist hedge fund looking 0:08:49.280 --> 0:08:53.040 to arbitrage funds to capture quick profits. This attack is 0:08:53.080 --> 0:08:57.360 not about government's performance or discounts. It is about executing 0:08:57.440 --> 0:09:01.760 saba's well known playbook buying can, rolling positions, and forcing 0:09:01.800 --> 0:09:05.280 short term changes that harm retail investors to benefit SABA 0:09:05.559 --> 0:09:08.400 and at touch fund investors. What is your response to 0:09:08.440 --> 0:09:13.839 that and what what do you do after these campaigns? 0:09:13.960 --> 0:09:16.680 Yeah, you know, when I sit here and think, throw 0:09:16.720 --> 0:09:18.800 your best at me, Shali, Like they send you a question, 0:09:18.960 --> 0:09:21.560 just please, like give me your toughest question. There's no, 0:09:21.840 --> 0:09:23.800 there's no, we're not We're not. I'm not here to 0:09:23.840 --> 0:09:26.439 be to be, we don't have some friendly arrangement. Ask 0:09:26.520 --> 0:09:29.280 me anything you want. I fear none of their questions 0:09:29.280 --> 0:09:32.800 because they're so absurd. Okay, when they say that we're 0:09:32.880 --> 0:09:36.600 using some purported playbook to help investors in the short term, 0:09:36.679 --> 0:09:39.319 where is the long term pain of making investors money? 0:09:39.400 --> 0:09:41.280 Usually when you say you have a short term motive, 0:09:41.520 --> 0:09:44.960 there's a long term consequence having the funds, have investors 0:09:45.000 --> 0:09:45.960 have a chance to get out. 0:09:45.880 --> 0:09:48.360 At full value. Where is where is the negative in that? 0:09:48.400 --> 0:09:50.280 And I'm not going to use my words, Okay, I 0:09:50.360 --> 0:09:52.120 assess which is independent? 0:09:52.280 --> 0:09:52.679 Okay? 0:09:52.800 --> 0:09:56.760 Which stands to tell the small investor how they should 0:09:56.840 --> 0:09:59.560 view this kind of rough contest that you know that 0:09:59.559 --> 0:10:03.160 that we're having. Here's what ISS said about this year. Okay, 0:10:03.640 --> 0:10:07.800 the board is deeply entrenched. A direct intervention remains necessary. 0:10:08.040 --> 0:10:10.920 It is rare to witness a board so brazenly flout 0:10:10.960 --> 0:10:14.320 the most basic of shareholder rights in furtherance of their 0:10:14.360 --> 0:10:15.000 own enrichment. 0:10:15.080 --> 0:10:15.959 I'll read one more. 0:10:16.400 --> 0:10:19.160 The board actions are so grave that they would warrant 0:10:19.240 --> 0:10:23.400 adverse vote for incumbents in an uncontested election. What Isss 0:10:23.440 --> 0:10:25.600 said is that even if we didn't run against Blackrock, 0:10:25.800 --> 0:10:28.600 they would have recommended against their nominees. That is literally 0:10:28.640 --> 0:10:30.160 how bad it is. And I want to just say, 0:10:30.360 --> 0:10:33.200 BlackRock's an amazing firm. They managed ten and a half 0:10:33.200 --> 0:10:35.920 trillion dollars by last account. This might be big to us, 0:10:35.920 --> 0:10:38.760 This might be very big to our investors. This is tiny, 0:10:38.760 --> 0:10:41.320 small potatoes, and it will someday be a case study 0:10:41.480 --> 0:10:45.240 at HBS of a strategy failure that for five billion 0:10:45.280 --> 0:10:47.840 dollars of action of buying back funds at a discount, 0:10:48.160 --> 0:10:51.160 including their own employees who would get to make that money, 0:10:51.200 --> 0:10:53.680 including their shareholders, that they would say, look, we actually 0:10:53.679 --> 0:10:55.559 care about you. We're going to treat you the way 0:10:55.600 --> 0:10:57.400 other managers are treating their shareholders. 0:10:57.559 --> 0:10:59.200 They wouldn't have this problem on their hands. 0:10:59.200 --> 0:11:02.840 They have amazing but for closed end funds, they basically 0:11:02.920 --> 0:11:04.959 have taken the position no one is going to tell 0:11:05.040 --> 0:11:07.360 us what to do, and we're willing to do whatever 0:11:07.400 --> 0:11:11.240 it takes to squash share the rights of the shareholder, 0:11:11.240 --> 0:11:13.560 which is enshrined in the forty Act. The forty Act 0:11:13.720 --> 0:11:16.760 is there, the nineteen forty Act, the Investment Company Act 0:11:16.760 --> 0:11:19.480 is there to protect small investors. They don't need the 0:11:19.520 --> 0:11:22.280 same protections in ETFs because you can vote with your feet, 0:11:22.320 --> 0:11:24.080 you can redeem a mutual fund, you can sell an 0:11:24.080 --> 0:11:26.360 ETF at a ne EV. But they are violating the 0:11:26.400 --> 0:11:29.600 Investment Company Act. Don't trust my words. A judge said 0:11:29.640 --> 0:11:31.320 it last year and we won our case. 0:11:31.440 --> 0:11:34.240 What is your endgame here, because in addition to yes, 0:11:34.280 --> 0:11:37.240 they did support you on the director push, but they 0:11:37.280 --> 0:11:40.720 did not support you iss that is to terminate black 0:11:40.800 --> 0:11:44.240 Rock as the investment advisor. Is your ultimate end game 0:11:44.400 --> 0:11:45.640 to take over these funds. 0:11:46.520 --> 0:11:48.760 So we've been in this is not my first rodeo. 0:11:48.800 --> 0:11:51.760 We've been in about I don't know eighty campaigns, and 0:11:51.960 --> 0:11:55.640 across eighty campaigns, only two times did the end result 0:11:55.720 --> 0:11:57.199 come that we took it over. In the first case, 0:11:57.200 --> 0:11:59.240 actually the manager resigned. They said we'll stay on as 0:11:59.320 --> 0:12:02.680 manager until you can find a new manager. So we 0:12:02.720 --> 0:12:04.400 don't come into it with that goal. We come into 0:12:04.480 --> 0:12:06.400 it with the goal of making our investors' money, and 0:12:06.760 --> 0:12:08.800 it turns out all shareholders get to make the same 0:12:08.840 --> 0:12:10.720 amount of money. They don't have to pay the legal 0:12:10.720 --> 0:12:13.040 fees that we're paying. And by the way, Blackrock has 0:12:13.080 --> 0:12:15.760 sent tons of mailers. You saw the chiron and you 0:12:15.800 --> 0:12:18.640 saw the graphic SABA is trying to destroy your fund. 0:12:18.720 --> 0:12:21.960 That mailer went out four or five times. Robo calls 0:12:22.000 --> 0:12:23.679 on and on. I actually receive them because I'm a 0:12:23.920 --> 0:12:27.160 personal shareholder. I receive these these robo calls and these mailers. 0:12:27.360 --> 0:12:29.240 And what's amazing in the case of Big Z is 0:12:29.240 --> 0:12:31.200 the only one I can talk about. They only got 0:12:31.240 --> 0:12:33.000 one out of seven shareholders to. 0:12:33.040 --> 0:12:33.560 Vote for them. 0:12:33.679 --> 0:12:35.959 I mean, it's just it's just incredible. That's despite the 0:12:36.520 --> 0:12:38.000 So what is my end goal? My end goal is 0:12:38.040 --> 0:12:40.120 to turn these funds back to an ev and make 0:12:40.200 --> 0:12:42.960 everyone a billion three not because I'm some sort of 0:12:43.000 --> 0:12:46.760 management McKinsey wizard, because NAV is a billion three away. 0:12:47.000 --> 0:12:48.800 Has this gotten personal? 0:12:53.720 --> 0:12:56.280 I mean I definitely, you know, I definitely a feeling 0:12:56.320 --> 0:12:58.680 it on the stage right, But no, it's really you 0:12:58.679 --> 0:13:01.280 know what it is. I have a pet, my pet, Peeve, 0:13:01.679 --> 0:13:05.080 is this is going to sound a little corny. Is injustice? Okay, 0:13:05.160 --> 0:13:08.200 it's everyone has their own. It's it's abusive. And and 0:13:08.280 --> 0:13:10.480 so I just, having been doing this, having been in 0:13:10.520 --> 0:13:13.400 eighty campaigns before, I just haven't seen it. We actually 0:13:13.960 --> 0:13:16.800 decided this past year and year two of this craziness 0:13:16.920 --> 0:13:20.600 to launch a fund dedicated to the closed in funds 0:13:20.600 --> 0:13:23.000 of a single manager. Okay, we didn't say we're going 0:13:23.080 --> 0:13:25.480 to pick black Rock. We looked at the attributes. What 0:13:25.520 --> 0:13:27.360 are the funds that are at the biggest discounts, What 0:13:27.400 --> 0:13:29.439 are the funds that have the worst governance? I should 0:13:29.440 --> 0:13:31.480 say those two funds you mentioned that we run, we 0:13:31.559 --> 0:13:33.080 put in place the best governance. 0:13:33.360 --> 0:13:34.360 ISS agrees. 0:13:34.720 --> 0:13:36.680 We put in place governance where you count the number 0:13:36.720 --> 0:13:39.440 of votes, not the number of whatever that you know. 0:13:39.480 --> 0:13:41.520 I don't even know how to describe the You know 0:13:41.720 --> 0:13:43.720 that you need half of all the shares to be 0:13:43.880 --> 0:13:46.080 voted in your favor, even if half don't even show up. 0:13:46.240 --> 0:13:49.320 So all of those things annual elections instead of staggered elections. 0:13:49.720 --> 0:13:52.320 It is it is only personal in the sense that 0:13:52.400 --> 0:13:54.960 it is it to me violates. We're so lucky in 0:13:54.960 --> 0:13:57.839 this business. The amount of money that managers management firms 0:13:57.840 --> 0:13:59.760 make they have ten and a half trillion dollars to 0:13:59.840 --> 0:14:01.400 do this because they want. 0:14:01.280 --> 0:14:02.600 To trap capital. 0:14:03.720 --> 0:14:06.640 They're basically blinded by this being long term capital that 0:14:06.720 --> 0:14:08.959 cannot be redeemed and they want to hold on to it. 0:14:09.200 --> 0:14:11.520 And so it to me, it's it's like a very 0:14:11.559 --> 0:14:14.480 noble fight. And we've received you can just look on Twitter, 0:14:14.679 --> 0:14:17.640 hundreds and hundreds of positive comments and basically not one 0:14:17.720 --> 0:14:23.600 negative comment. So I do enjoy the retail coming along 0:14:23.640 --> 0:14:24.120 for the ride. 0:14:24.160 --> 0:14:25.760 Yes, in that sense, it's personal. 0:14:26.120 --> 0:14:29.280 So also to be clear, this is an investment strategy. 0:14:29.360 --> 0:14:31.920 This is a strategy that is meant to return money 0:14:32.000 --> 0:14:35.280 to shareholders. It's not just on concept. How profitable is 0:14:35.320 --> 0:14:37.600 it and how big of a strategy has it become. 0:14:37.760 --> 0:14:40.720 Has SABA really pivoted from becoming a tail fund to 0:14:40.760 --> 0:14:41.680 an activist fund? 0:14:42.000 --> 0:14:43.760 Well, give me a tail event and I'll be I'll 0:14:43.760 --> 0:14:45.840 be a tail fund manager again. But we've had what 0:14:45.880 --> 0:14:47.640 have we had like forty straight days of the S 0:14:47.680 --> 0:14:50.080 and P not going down even three quarters of a percent? 0:14:50.760 --> 0:14:53.400 I am it is a It is a big business 0:14:53.400 --> 0:14:55.240 for us. We own six billion of closed end funds, 0:14:55.280 --> 0:14:57.280 a full third of them or just this single manager 0:14:57.280 --> 0:14:59.720 black Rock and and many of them we think have 0:14:59.760 --> 0:15:02.360 good governance, they just are at discounts. We don't have 0:15:02.400 --> 0:15:05.120 a governance issue. So it's it's it is quite a 0:15:05.120 --> 0:15:07.280 big business for us, and I can't really on this 0:15:07.320 --> 0:15:09.440 stage speak to the returns. But we have an ETF, 0:15:09.480 --> 0:15:12.440 for example, the ticker is CEFS. It's been around for 0:15:12.480 --> 0:15:14.840 more than seven years, and people can plug in how 0:15:14.840 --> 0:15:18.000 that did versus the three other ETFs that own closed 0:15:18.040 --> 0:15:21.000 in funds. It's done, It's done very well. 0:15:21.080 --> 0:15:21.520 How well? 0:15:23.080 --> 0:15:23.440 All right? 0:15:23.520 --> 0:15:25.400 Well, if someone were to plug it into Bloomberg and 0:15:25.440 --> 0:15:28.160 they put CFS and then they put the invesco version 0:15:28.280 --> 0:15:30.880 or the first trust version, I think for the last 0:15:30.880 --> 0:15:33.280 three years, and it's held a lot of it, it's 0:15:33.320 --> 0:15:34.920 been in fixed income, which is you know, had a 0:15:34.920 --> 0:15:37.880 tough time. Those other funds have made between zero and 0:15:37.920 --> 0:15:39.440 two percent and we've made ten percent. 0:15:39.880 --> 0:15:43.680 So let's broaden out here again, because you know, people 0:15:43.720 --> 0:15:45.800 have looked at you for credit markets for a long time. 0:15:46.120 --> 0:15:48.960 When we talk about the closed un funds strategy, there's 0:15:49.040 --> 0:15:52.240 a deeper question. It's not really just about closed on funds. 0:15:52.400 --> 0:15:55.280 There's a whole push by the private acset industry to 0:15:56.080 --> 0:15:59.000 push into retail, to push into interval funds to find 0:15:59.000 --> 0:16:02.760 new strategies to bring money in. Are all of those 0:16:02.800 --> 0:16:04.800 funds vulnerable to activists? 0:16:05.480 --> 0:16:10.000 So by the laws of depending on the structure, some are, 0:16:10.080 --> 0:16:12.320 some are not. You know, in the interval fund you 0:16:12.360 --> 0:16:14.520 generally you only have the right to redeem five percent, 0:16:14.600 --> 0:16:17.440 so you're getting five percent back per quarter, but you can't. 0:16:18.560 --> 0:16:21.200 They also invest generally in deeply liquid assets, so you 0:16:21.200 --> 0:16:24.320 couldn't just sell Microsoft or IBM and raise the cash. 0:16:24.480 --> 0:16:27.640 So it is interesting for me as having been in 0:16:27.720 --> 0:16:30.040 credit at the forefront of all the innovation that came 0:16:30.120 --> 0:16:34.240 after nineteen ninety eight, with with credit derivatives and synthetic 0:16:34.280 --> 0:16:36.960 securitization and all of this sort of stuff. And back 0:16:37.040 --> 0:16:39.400 then retail investors were redeemed. 0:16:39.160 --> 0:16:40.440 Unsuitable to own these things. 0:16:40.560 --> 0:16:42.320 You couldn't own high yields really if you were not 0:16:42.400 --> 0:16:45.680 a qualified investor. And now whether it's Colo tranches, you know, 0:16:45.720 --> 0:16:49.720 alphabet soup, and so this has been an amazing boom 0:16:49.800 --> 0:16:53.240 for the largest asset managers, the amazing managers like in 0:16:53.320 --> 0:16:56.520 Aries or Apollo that can bring these products their reputations 0:16:56.960 --> 0:16:59.560 and good governance, I should say, because we also see 0:16:59.600 --> 0:17:02.440 a lot of good governance JP Morgan has great governance 0:17:02.440 --> 0:17:03.840 on their closed in funds. 0:17:03.760 --> 0:17:07.920 And we see that. You know, there is huge investor demand. 0:17:08.280 --> 0:17:10.840 The private credit space was a cottage industry a decade 0:17:10.880 --> 0:17:13.120 ago at less than a quarter trillion dollars. Now it's 0:17:13.119 --> 0:17:15.600 one and a half trillion, and it's growing like gangbusters. 0:17:15.600 --> 0:17:19.320 So this kind of liquid credit investing that you're referring 0:17:19.320 --> 0:17:21.639 to allows the manager to lock up for many years. 0:17:21.880 --> 0:17:24.480 It's great for their stock price, it may be great 0:17:24.480 --> 0:17:26.560 for their investors, but you know, we are in a 0:17:26.560 --> 0:17:28.840 little bit of a zero sum world. Like if making 0:17:28.920 --> 0:17:31.800 loans that are secured that are safe, that of you know, 0:17:31.800 --> 0:17:34.560 a lot of acid coverage at twelve percent or thirteen 0:17:34.600 --> 0:17:38.600 percent is great for areas, it probably ain't great for 0:17:38.680 --> 0:17:43.280 the for the borrower, especially in this higher for longer world. 0:17:43.280 --> 0:17:44.840 So just to close on that, just to say, I 0:17:44.880 --> 0:17:47.480 think people just even three months ago, we're really expecting 0:17:47.560 --> 0:17:49.800 rates to come down and that thirteen to go to 0:17:49.840 --> 0:17:52.720 twelve eleven ten and really alleviate that pressure. But I 0:17:52.720 --> 0:17:55.119 think higher for longer we're headed for some sort of 0:17:55.119 --> 0:17:59.520 collision course between If we have that in conjunction with 0:17:59.560 --> 0:18:01.240 an economic slowdown, we are going. 0:18:01.040 --> 0:18:02.080 To have a default cycle. 0:18:02.280 --> 0:18:04.880 We are going to see which firms were good at 0:18:04.960 --> 0:18:07.760 private credit and which we're not, because private credit has 0:18:07.800 --> 0:18:11.840 been touted as this like amazing thing, almost like NFTs 0:18:12.040 --> 0:18:14.960 or you know, chatch ept. I mean, what is private credit? 0:18:15.000 --> 0:18:18.080 You're you're making loans to smaller companies. I mean, how 0:18:18.200 --> 0:18:21.520 is that sexy? No, you know so, but it's very 0:18:21.520 --> 0:18:24.719