1 00:00:08,680 --> 00:00:12,720 Speaker 1: Stand up, Stand up, right. 2 00:00:14,600 --> 00:00:15,560 Speaker 2: Up, set up. 3 00:00:18,560 --> 00:00:24,840 Speaker 3: Right. This week an unconventional At the Money at future 4 00:00:24,880 --> 00:00:29,200 Speaker 3: Proof Miami, I sat down with Boaz Weinstein. He's a 5 00:00:29,280 --> 00:00:33,080 Speaker 3: previous guest on Masters in Business. He runs SABA Capital, 6 00:00:33,600 --> 00:00:36,080 Speaker 3: and he's one of these people that looks at the 7 00:00:36,120 --> 00:00:41,600 Speaker 3: world a little differently than everybody else. He identifies mispricings 8 00:00:41,800 --> 00:00:46,120 Speaker 3: in real time, and not only does he purchase various 9 00:00:46,200 --> 00:00:50,839 Speaker 3: funds that are mispriced, he then goes about agitating for change. 10 00:00:51,479 --> 00:00:53,560 Speaker 3: One of the areas that he had been doing this 11 00:00:54,000 --> 00:00:57,280 Speaker 3: with in the past was spas, and we've talked about 12 00:00:57,280 --> 00:01:01,960 Speaker 3: that on our previous recording with him. Lately, he has 13 00:01:02,040 --> 00:01:06,959 Speaker 3: been agitating for change in closed end funds that are 14 00:01:07,000 --> 00:01:11,559 Speaker 3: trading at double digit discounts to fair value. A closed 15 00:01:11,680 --> 00:01:15,960 Speaker 3: end fund trades like an ETF, but it's constructed of 16 00:01:16,000 --> 00:01:21,640 Speaker 3: holdings like a mutual fund, and the actual closed end 17 00:01:21,680 --> 00:01:25,720 Speaker 3: fund will trade up or down simply in response to 18 00:01:25,880 --> 00:01:30,880 Speaker 3: trading supply and demand. Anyway, rather than have me babbel, 19 00:01:31,280 --> 00:01:35,040 Speaker 3: here is our extra special edition live from future Proof 20 00:01:35,120 --> 00:01:40,280 Speaker 3: Miami At the Money with Boaz Weinstein. So let's start 21 00:01:40,319 --> 00:01:44,640 Speaker 3: talking a little bit about what you actually do. You 22 00:01:44,840 --> 00:01:49,920 Speaker 3: have been delivering equity like returns with credit like risks, 23 00:01:49,920 --> 00:01:53,480 Speaker 3: with bond like risks. That's quite a trick. Tell us 24 00:01:53,480 --> 00:01:55,680 Speaker 3: a little bit about the areas you focus on. 25 00:01:56,640 --> 00:02:00,840 Speaker 1: Sure, So I've had my firm for sixteen years to 26 00:02:00,960 --> 00:02:05,000 Speaker 1: hedge fund and we have three publicly listed vehicles, one 27 00:02:05,040 --> 00:02:08,200 Speaker 1: of them being an ETF, and two closed end funds 28 00:02:08,600 --> 00:02:12,040 Speaker 1: on the New York Stock Exchange. And and I've been 29 00:02:12,040 --> 00:02:14,880 Speaker 1: working on Wall Street continuously other than when I was 30 00:02:14,919 --> 00:02:18,679 Speaker 1: in school, since I was sixteen. And you know, over 31 00:02:18,720 --> 00:02:22,400 Speaker 1: that time, I've had the chance to be right sometimes 32 00:02:22,560 --> 00:02:27,400 Speaker 1: wrong sometimes and also seeing how people that were right 33 00:02:27,440 --> 00:02:31,079 Speaker 1: for a while, and you know, people worshiped to Garzarelly 34 00:02:31,360 --> 00:02:34,120 Speaker 1: or copy Wood or you know whoever the flavor of 35 00:02:34,160 --> 00:02:38,200 Speaker 1: the of the period was. But eventually we realize how 36 00:02:38,240 --> 00:02:40,520 Speaker 1: hard it is to know where the markets are going 37 00:02:40,600 --> 00:02:45,440 Speaker 1: to go. And and sometimes we excuse ourselves because we say, Okay, 38 00:02:45,440 --> 00:02:47,280 Speaker 1: it was a surprise, it was nine to eleven, or 39 00:02:47,280 --> 00:02:50,840 Speaker 1: it was COVID, But predicting the markets is really tough. 40 00:02:51,080 --> 00:02:53,120 Speaker 2: And and you. 41 00:02:53,040 --> 00:02:54,640 Speaker 1: Know, I say this, We've been in a bull market, 42 00:02:54,800 --> 00:02:57,640 Speaker 1: so beta has paid off, but it's not always going 43 00:02:57,680 --> 00:03:01,240 Speaker 1: to And I always was very focused on arbitrage. I 44 00:03:01,240 --> 00:03:04,440 Speaker 1: was always interested in miss pricings, not having the beta 45 00:03:05,080 --> 00:03:09,280 Speaker 1: being long, one thing short another thing, looking for miss pricings, 46 00:03:09,320 --> 00:03:12,120 Speaker 1: whether it was in the spack market when they tumbled 47 00:03:12,160 --> 00:03:15,360 Speaker 1: and they had bond like risk, as you said, with 48 00:03:15,440 --> 00:03:18,400 Speaker 1: some equity upside, when they were trading below their redeemable 49 00:03:18,480 --> 00:03:21,840 Speaker 1: value and they were in T bills, and about ten 50 00:03:21,919 --> 00:03:25,480 Speaker 1: years ago, twelve years ago. Now I got very interested 51 00:03:25,520 --> 00:03:27,760 Speaker 1: in a product that many of view in the audience 52 00:03:27,960 --> 00:03:30,840 Speaker 1: are familiar with because it's a retail product, which is 53 00:03:30,880 --> 00:03:33,280 Speaker 1: closed end funds. Now, if I asked for hands, who 54 00:03:33,280 --> 00:03:35,360 Speaker 1: knows what a closed in fund is? I think almost everyone's. 55 00:03:35,560 --> 00:03:37,800 Speaker 1: I didn't even ask, and that guy stuck his hand up. Okay, 56 00:03:37,600 --> 00:03:41,120 Speaker 1: so people know what they are. I just want to 57 00:03:41,160 --> 00:03:43,600 Speaker 1: just take a second, though, because what I love about 58 00:03:43,840 --> 00:03:46,360 Speaker 1: what we do in closed end funds is that it 59 00:03:46,400 --> 00:03:49,120 Speaker 1: does not require us to think we know the future 60 00:03:49,560 --> 00:03:52,480 Speaker 1: the direction of markets. But as you all probably know, 61 00:03:52,520 --> 00:03:54,920 Speaker 1: there's about five hundred of them, about half are in 62 00:03:54,960 --> 00:03:57,560 Speaker 1: the UK, half are in the US, small number in 63 00:03:57,600 --> 00:04:03,080 Speaker 1: Australia and Canada. And often they own public securities, maybe 64 00:04:03,200 --> 00:04:10,800 Speaker 1: entirely public. Sometimes they own illiquid private securities. Reads private equity, 65 00:04:11,560 --> 00:04:15,240 Speaker 1: music royalties, all sorts of exotic things. But I've been 66 00:04:15,280 --> 00:04:18,680 Speaker 1: focused on the public security side. So funds we see 67 00:04:18,720 --> 00:04:20,880 Speaker 1: actually the sponsors of them right here front and center. 68 00:04:20,880 --> 00:04:24,120 Speaker 1: We have Blackrock, we have Devine has dozens of UNI funds. 69 00:04:24,160 --> 00:04:27,000 Speaker 1: Blackrock has about eighty of these closed end funds. And 70 00:04:27,040 --> 00:04:30,400 Speaker 1: you can check every day on Bloomberg or elsewhere what 71 00:04:30,440 --> 00:04:32,960 Speaker 1: the NAV is, and there is no disputing what the 72 00:04:33,040 --> 00:04:35,719 Speaker 1: NAV is. The NAV is calculated off of the closing price, 73 00:04:36,000 --> 00:04:37,960 Speaker 1: so all of us would agree with the NAV is. 74 00:04:38,520 --> 00:04:40,960 Speaker 1: So you have the NAV, you have the price, and 75 00:04:41,000 --> 00:04:43,320 Speaker 1: those two things are often not the same. And when 76 00:04:43,360 --> 00:04:47,640 Speaker 1: the NAV is at a big discount, it isn't necessarily 77 00:04:47,680 --> 00:04:49,960 Speaker 1: an opportunity barry, because it can stay at that discount 78 00:04:49,960 --> 00:04:53,320 Speaker 1: for a decade. Why should it not become a bigger discount. 79 00:04:53,360 --> 00:04:55,640 Speaker 1: Who's to say that that's money well spent. Maybe the 80 00:04:55,680 --> 00:04:59,960 Speaker 1: discount reflects the manager's fees and the investors' inability to change. 81 00:05:00,520 --> 00:05:04,120 Speaker 1: So what we've done is we've come in with an 82 00:05:04,120 --> 00:05:07,800 Speaker 1: institutional great offering, be it our private funds or our 83 00:05:08,160 --> 00:05:11,679 Speaker 1: publicly listed funds, and we bought seven billion of closed 84 00:05:11,760 --> 00:05:14,440 Speaker 1: end funds. So we're the world's largest owner of closed 85 00:05:14,520 --> 00:05:17,440 Speaker 1: end funds. And we didn't just buy seven billion willy nilly. 86 00:05:17,720 --> 00:05:20,039 Speaker 1: We pick the ones with the biggest discounts, with the 87 00:05:20,040 --> 00:05:22,919 Speaker 1: best language, with the managers that are going to be 88 00:05:23,400 --> 00:05:25,839 Speaker 1: most in our view, likely to do a deal. Because 89 00:05:25,880 --> 00:05:28,200 Speaker 1: here's the where the rubber meets the road. If you 90 00:05:28,240 --> 00:05:31,719 Speaker 1: buy a dollar of NAV for eighty six cents, and 91 00:05:31,760 --> 00:05:33,880 Speaker 1: even if it takes you two years to turn eighty 92 00:05:33,920 --> 00:05:37,240 Speaker 1: six back into one hundred, you have added equity like 93 00:05:37,279 --> 00:05:39,880 Speaker 1: returns on top of whatever the underlying return is. And 94 00:05:39,920 --> 00:05:43,160 Speaker 1: sometimes underlying return is it's Muni's you know, it's things 95 00:05:43,160 --> 00:05:46,960 Speaker 1: we want. And so what I found over time is 96 00:05:47,000 --> 00:05:49,919 Speaker 1: that the bigger we got, the more votes we got, 97 00:05:50,080 --> 00:05:53,880 Speaker 1: and the more we got management to take steps. And 98 00:05:53,880 --> 00:05:56,000 Speaker 1: I'll pause in a second, give you the microphone back 99 00:05:56,400 --> 00:05:59,400 Speaker 1: to press a button and immediately give everyone eighty six 100 00:05:59,440 --> 00:06:02,919 Speaker 1: back into a hundred. What are those steps? Open end 101 00:06:02,960 --> 00:06:05,600 Speaker 1: a closed end fund, make it into like an ETF 102 00:06:05,720 --> 00:06:08,320 Speaker 1: or a mutual fund. The discount disappears overnight. 103 00:06:08,960 --> 00:06:11,040 Speaker 3: And that's because of the arbitrage opportunity. 104 00:06:11,160 --> 00:06:14,120 Speaker 2: That's because yeah, ETFs are redeemable. There. 105 00:06:14,160 --> 00:06:16,679 Speaker 1: You can create them, you can redeem them. Mutual funds 106 00:06:16,880 --> 00:06:18,960 Speaker 1: have the manager has to sell and give you navback, 107 00:06:19,240 --> 00:06:22,279 Speaker 1: and so open ending a closed end fund, no one disputes. 108 00:06:22,320 --> 00:06:25,760 Speaker 1: Will give the entire discount back to the investor who 109 00:06:25,839 --> 00:06:27,680 Speaker 1: has suffered in it if they bought it at IPO 110 00:06:28,000 --> 00:06:30,520 Speaker 1: or otherwise. And so if you think about it, we're 111 00:06:30,560 --> 00:06:33,200 Speaker 1: not talking about small potatoes. Eighty six to one hundred, 112 00:06:33,240 --> 00:06:35,280 Speaker 1: by the way, is more than fourteen percent, and I 113 00:06:35,320 --> 00:06:37,440 Speaker 1: think you all know why one hundred to eighty six 114 00:06:37,560 --> 00:06:42,040 Speaker 1: is fourteen percent. So you know we have been successful 115 00:06:42,240 --> 00:06:44,800 Speaker 1: in getting it done faster and faster because as we 116 00:06:44,839 --> 00:06:47,120 Speaker 1: went from a billion to three to five to seven, 117 00:06:47,440 --> 00:06:50,080 Speaker 1: our ability to vote the bums out as they say 118 00:06:50,160 --> 00:06:52,760 Speaker 1: if they don't do what's right for shareholders and put 119 00:06:52,800 --> 00:06:55,960 Speaker 1: in a board that will is now causing managers to 120 00:06:56,000 --> 00:06:59,240 Speaker 1: increasingly take practice steps to narrow the discounts before we 121 00:06:59,279 --> 00:07:00,720 Speaker 1: ever get to their their board meeting. 122 00:07:00,800 --> 00:07:03,200 Speaker 3: So let's talk a little bit about that move from 123 00:07:03,320 --> 00:07:06,680 Speaker 3: two billion to seven billion. When I had you on 124 00:07:06,839 --> 00:07:09,920 Speaker 3: Master's in business, you had a chunk of money in 125 00:07:09,960 --> 00:07:12,280 Speaker 3: spacks and we could talk about spacks a little later, 126 00:07:12,680 --> 00:07:15,320 Speaker 3: and you had a chunk of money in closed end funds, 127 00:07:16,000 --> 00:07:21,560 Speaker 3: and part of the conversation was the difficulty in getting 128 00:07:22,000 --> 00:07:26,240 Speaker 3: entrench management's attention to say, hey, why are you selling 129 00:07:26,320 --> 00:07:29,840 Speaker 3: dollar bills for seventy five cents? Why aren't you unlocking 130 00:07:29,840 --> 00:07:33,480 Speaker 3: this value? Tell us the process that led you to 131 00:07:33,520 --> 00:07:37,600 Speaker 3: go from two billion in closed end funds to seven billion. 132 00:07:37,760 --> 00:07:40,960 Speaker 1: Right so, and unfortunately they're not the ones selling a 133 00:07:41,000 --> 00:07:43,840 Speaker 1: dollar for eighty five cents. It's the frustrated shareholder that 134 00:07:44,200 --> 00:07:46,600 Speaker 1: has seen it sit there and they have no way 135 00:07:46,600 --> 00:07:49,000 Speaker 1: to get back to a dollar without without us because 136 00:07:49,000 --> 00:07:52,840 Speaker 1: they're small investors. And so over time we started to 137 00:07:52,840 --> 00:07:55,400 Speaker 1: get more successful at it. Thanks for mentioning, you know, 138 00:07:55,400 --> 00:07:58,960 Speaker 1: we got these kind of institutional awards and all of 139 00:07:58,960 --> 00:08:02,920 Speaker 1: a sudden, institution US state pensions looked at this as 140 00:08:03,160 --> 00:08:06,280 Speaker 1: an alpha that they don't have in their portfolio. So 141 00:08:06,560 --> 00:08:10,240 Speaker 1: you know, if they give us an often institutional ticket 142 00:08:10,280 --> 00:08:12,360 Speaker 1: is over one hundred million dollars if we from a 143 00:08:12,360 --> 00:08:14,200 Speaker 1: state pension. We got four of them in the last 144 00:08:14,200 --> 00:08:17,880 Speaker 1: two years. It allows us to get bigger, faster, stronger, 145 00:08:18,360 --> 00:08:21,119 Speaker 1: so that we don't have to have a fifteen percent 146 00:08:21,160 --> 00:08:23,560 Speaker 1: position in the fund. If we have a twenty nine 147 00:08:23,600 --> 00:08:26,680 Speaker 1: percent position in the fund. Management is very worried that 148 00:08:26,760 --> 00:08:29,440 Speaker 1: we'll be able to cause the fund to liquidate and 149 00:08:29,440 --> 00:08:32,200 Speaker 1: they would lose one hundred percent. And so basically they 150 00:08:32,280 --> 00:08:35,520 Speaker 1: know that something screwed up that they could have given 151 00:08:35,600 --> 00:08:37,440 Speaker 1: up a little bit of fees to shrink the fund 152 00:08:37,600 --> 00:08:40,280 Speaker 1: buy back stock. Buying back a dollar for eighty eight 153 00:08:40,320 --> 00:08:43,000 Speaker 1: cents is a creative to make their investors' money. But 154 00:08:43,080 --> 00:08:47,720 Speaker 1: it's always really a question of you know, greed, where 155 00:08:47,760 --> 00:08:49,880 Speaker 1: the manager says, I. 156 00:08:49,800 --> 00:08:50,520 Speaker 2: Don't want to do that. 157 00:08:50,640 --> 00:08:52,480 Speaker 1: People should be patient, whether it's been a year or 158 00:08:52,480 --> 00:08:54,839 Speaker 1: five years, and they don't want to shrink their fund, 159 00:08:54,920 --> 00:08:57,040 Speaker 1: and if they wait too long, I'm going to shrink 160 00:08:57,080 --> 00:08:59,079 Speaker 1: their fund for them in a much more severe way. 161 00:08:59,320 --> 00:09:02,840 Speaker 1: And in two kse is, actually we replaced the manager 162 00:09:03,240 --> 00:09:06,920 Speaker 1: and we were nominated awarded with the mandate. So we 163 00:09:07,000 --> 00:09:08,760 Speaker 1: now run two of these funds. We have two closed 164 00:09:08,800 --> 00:09:13,360 Speaker 1: end funds of closed end funds, and so you know, 165 00:09:13,480 --> 00:09:17,239 Speaker 1: it's really just like a fight between two asset managers 166 00:09:17,679 --> 00:09:21,080 Speaker 1: that have a vested interest in themselves. But also I'm 167 00:09:21,080 --> 00:09:24,240 Speaker 1: invested alongside the shareholders. I want what they want. I 168 00:09:24,280 --> 00:09:26,240 Speaker 1: want a chance to exit at an ev if the 169 00:09:26,240 --> 00:09:28,000 Speaker 1: investor doesn't want to if you open end the fund 170 00:09:28,000 --> 00:09:31,000 Speaker 1: and they stay great. They If the manager tenders for 171 00:09:31,040 --> 00:09:33,200 Speaker 1: shares at NAV and you don't want a tender for 172 00:09:33,200 --> 00:09:37,679 Speaker 1: some reason, your loss great. But my view is that 173 00:09:39,000 --> 00:09:41,640 Speaker 1: just because this thing iPod in nineteen forty nine, by 174 00:09:41,640 --> 00:09:44,000 Speaker 1: the way, there's one in the UK iPod eighteen fifty five. 175 00:09:44,320 --> 00:09:46,959 Speaker 1: Just because at iPod in eighteen fifty five doesn't mean 176 00:09:47,040 --> 00:09:50,600 Speaker 1: until three thousand and fifty five the shareholder has to 177 00:09:50,960 --> 00:09:55,240 Speaker 1: suffer under the discount because they signed up to have 178 00:09:55,280 --> 00:09:57,360 Speaker 1: to elect a board, and the board is supposed to 179 00:09:57,400 --> 00:10:00,080 Speaker 1: be working for shareholders. And what I find as a 180 00:10:00,160 --> 00:10:04,880 Speaker 1: patriotic American capitalist is that over in the UK the 181 00:10:04,960 --> 00:10:08,200 Speaker 1: boards have not forgotten that they're working for shareholders, much 182 00:10:08,200 --> 00:10:10,760 Speaker 1: more than in the US, where often we have to 183 00:10:10,800 --> 00:10:12,880 Speaker 1: face entrenchment. One of the things we have to do 184 00:10:12,920 --> 00:10:16,080 Speaker 1: that our shareholders don't is pay legal bills and go 185 00:10:16,160 --> 00:10:19,480 Speaker 1: to court as we as we have successfully suing for 186 00:10:19,559 --> 00:10:21,400 Speaker 1: our right, for example, to vote all of our shares. 187 00:10:21,440 --> 00:10:25,240 Speaker 1: So it is a scrappy fight. But in about eighty 188 00:10:25,400 --> 00:10:29,920 Speaker 1: instances now we have gotten management to give investors a 189 00:10:30,000 --> 00:10:32,120 Speaker 1: chance to exit at any v or close, which they 190 00:10:32,200 --> 00:10:35,160 Speaker 1: never ever would have done without us. 191 00:10:35,559 --> 00:10:39,360 Speaker 3: And the returns of a closed end fund that looks 192 00:10:39,480 --> 00:10:44,080 Speaker 3: like a sixty forty portfolio. You've been generating returns of 193 00:10:44,120 --> 00:10:48,480 Speaker 3: about twelve percent, and a lot of these products, your competitors, 194 00:10:48,559 --> 00:10:52,400 Speaker 3: the other activists in the space, have been underperforming that. 195 00:10:52,480 --> 00:10:57,160 Speaker 3: They've been doing about four percent, which doesn't seem especially exciting. 196 00:10:57,800 --> 00:11:01,000 Speaker 3: What are you guys doing so differently with closed end 197 00:11:01,080 --> 00:11:05,079 Speaker 3: fund challenges that has led to this the track record 198 00:11:05,120 --> 00:11:07,560 Speaker 3: and the success sabas put together. 199 00:11:07,920 --> 00:11:10,000 Speaker 1: Yeah, so I think you're referring to our ETF. The 200 00:11:10,040 --> 00:11:15,720 Speaker 1: ticker is CEFS like closed in funds pleteral. And actually 201 00:11:16,320 --> 00:11:19,400 Speaker 1: those other competitor products are not activists. They're in fact 202 00:11:19,559 --> 00:11:22,880 Speaker 1: not you know, it's not that they're sometimes they're just 203 00:11:23,720 --> 00:11:25,600 Speaker 1: trying to find closed in funds they like, or maybe 204 00:11:25,600 --> 00:11:27,920 Speaker 1: it's more like an index approach to closed in funds. 205 00:11:28,080 --> 00:11:29,680 Speaker 1: And if you buy a closed in fund a minus 206 00:11:29,679 --> 00:11:32,760 Speaker 1: fourteen and a year later it's still a minus fourteen, 207 00:11:32,840 --> 00:11:34,720 Speaker 1: or you've paid the manager of their fee, you've also 208 00:11:34,800 --> 00:11:36,600 Speaker 1: charged your investor of the fee, so you have kind 209 00:11:36,600 --> 00:11:38,960 Speaker 1: of two layers of fees. So you better be narrowing 210 00:11:39,000 --> 00:11:42,000 Speaker 1: that discount or you're not delivering alpha, and so not 211 00:11:42,440 --> 00:11:44,440 Speaker 1: some of them are here, by the way, Invesco has 212 00:11:44,480 --> 00:11:48,080 Speaker 1: a product called PCEF, and what I also find interesting 213 00:11:48,120 --> 00:11:52,520 Speaker 1: in this space is that it's so retail centric. And 214 00:11:53,480 --> 00:11:57,080 Speaker 1: you know, if Morgan Stanley Wealth Management has recommended PCEF, 215 00:11:57,120 --> 00:11:59,640 Speaker 1: it will grow more even at making four percent a 216 00:11:59,679 --> 00:12:02,920 Speaker 1: year than then the same underlying closed end funds making 217 00:12:03,080 --> 00:12:05,600 Speaker 1: twelve percent a year. So I think PIECEF probably has 218 00:12:05,600 --> 00:12:07,959 Speaker 1: grown more than us in the last five We're actually 219 00:12:07,960 --> 00:12:12,080 Speaker 1: celebrating our eighth anniversary of this ETF. And so yeah, 220 00:12:12,120 --> 00:12:14,160 Speaker 1: so if you're not If you own one hundred clothes 221 00:12:14,200 --> 00:12:16,280 Speaker 1: in funds and the only ones that are narrowing are 222 00:12:16,280 --> 00:12:19,680 Speaker 1: the ones sabas in, you're gonna have a pretty mediocre 223 00:12:19,679 --> 00:12:22,960 Speaker 1: return after fees or all of ours. I do not 224 00:12:23,000 --> 00:12:26,040 Speaker 1: buy a closed in fund where I feel like, if 225 00:12:26,040 --> 00:12:29,040 Speaker 1: it doesn't narrow, I'm not going to go to management 226 00:12:29,080 --> 00:12:32,000 Speaker 1: and say, please, you have easy steps to make it narrow. 227 00:12:32,080 --> 00:12:34,479 Speaker 1: Do not put your own greed in front of your shareholders. 228 00:12:34,800 --> 00:12:38,080 Speaker 3: You just had an interview in the Financial Times last 229 00:12:38,120 --> 00:12:42,000 Speaker 3: month and I love the quote, I love punching a 230 00:12:42,040 --> 00:12:44,600 Speaker 3: bully in the nose. Tell us what you were doing 231 00:12:44,600 --> 00:12:47,320 Speaker 3: in the UK and why the Financial Times decided to 232 00:12:47,320 --> 00:12:48,840 Speaker 3: have a sit down with you. 233 00:12:50,200 --> 00:12:55,240 Speaker 1: So in the UK the market is even older than 234 00:12:55,280 --> 00:12:58,160 Speaker 1: it is here, and it's actually like there's a lot 235 00:12:58,160 --> 00:13:01,000 Speaker 1: of pride about They're called investment try there it's I 236 00:13:01,000 --> 00:13:03,079 Speaker 1: think forty percent of the foot seed two fifty or 237 00:13:03,120 --> 00:13:06,000 Speaker 1: these investment trusts. People seem to like them. They get 238 00:13:06,040 --> 00:13:07,560 Speaker 1: to go every year and sit in a meeting and 239 00:13:07,600 --> 00:13:09,920 Speaker 1: hear about the economy and have a have a ribbi 240 00:13:10,240 --> 00:13:15,079 Speaker 1: and you know, even if the manager has underperformed or outperformed, 241 00:13:15,880 --> 00:13:17,600 Speaker 1: there is a lot of love for the product. But 242 00:13:17,640 --> 00:13:21,600 Speaker 1: what happened was in twenty twenty one when we had 243 00:13:21,640 --> 00:13:23,959 Speaker 1: inflation and we had a crisis in the UK, the 244 00:13:24,080 --> 00:13:28,720 Speaker 1: LDI crisis, and people were selling things. And then later 245 00:13:28,840 --> 00:13:32,320 Speaker 1: even in twenty twenty four, they increased capital gains taxes 246 00:13:32,720 --> 00:13:34,840 Speaker 1: and it caused people to want to sell in front 247 00:13:34,880 --> 00:13:37,880 Speaker 1: of that before the new tax code. And the problem 248 00:13:37,920 --> 00:13:41,439 Speaker 1: with these products is they don't have natural buyers at 249 00:13:41,480 --> 00:13:45,000 Speaker 1: low discounts. Only really savvy investors that look for a 250 00:13:45,000 --> 00:13:47,320 Speaker 1: double digit discount are there to buy them. So they 251 00:13:47,320 --> 00:13:49,880 Speaker 1: can fall like a knife from minus one to minus 252 00:13:49,960 --> 00:13:53,640 Speaker 1: thirteen and with enough selling no matter how big we are, 253 00:13:53,640 --> 00:13:55,960 Speaker 1: even at seven billion in a five hundred billion space, 254 00:13:56,280 --> 00:13:58,400 Speaker 1: you know that that discount can grow. So in the 255 00:13:58,480 --> 00:14:01,079 Speaker 1: UK there was a lot of selling thanks to these 256 00:14:01,360 --> 00:14:06,360 Speaker 1: two problems, and we ramped up and we bought twenty 257 00:14:06,480 --> 00:14:10,720 Speaker 1: nine percent positions and some of these funds, and only 258 00:14:10,760 --> 00:14:13,080 Speaker 1: then were they willing to do things that they are now. 259 00:14:13,120 --> 00:14:15,400 Speaker 1: We're now currently engaged. It's in the press with four 260 00:14:15,440 --> 00:14:17,560 Speaker 1: of the boards and two of the other boards have 261 00:14:17,559 --> 00:14:20,360 Speaker 1: already agreed. We're going to give investors a cash option 262 00:14:20,480 --> 00:14:24,280 Speaker 1: to exit an NAV open end or tender, and that's 263 00:14:24,280 --> 00:14:25,640 Speaker 1: what we wanted. If you want to keep your if 264 00:14:25,680 --> 00:14:28,120 Speaker 1: you want to keep getting your steak dinner every year, 265 00:14:28,160 --> 00:14:29,440 Speaker 1: and you want to stay in your closed in fund, 266 00:14:29,440 --> 00:14:32,720 Speaker 1: whether it's underperformed by forty or outperformed by eight, which 267 00:14:32,760 --> 00:14:36,760 Speaker 1: were two actual funds in question. Fine, but there is 268 00:14:36,760 --> 00:14:39,760 Speaker 1: a set of shareholders, not just us, that if you 269 00:14:39,840 --> 00:14:41,360 Speaker 1: offer them a chance to get out at an av 270 00:14:41,800 --> 00:14:45,240 Speaker 1: they will take it because they're not foolish. They'll make 271 00:14:45,280 --> 00:14:48,240 Speaker 1: a twelve percent gain. Your portfolio literally goes up by 272 00:14:48,280 --> 00:14:51,240 Speaker 1: twelve thirteen percent in a day if it wasn't if 273 00:14:51,240 --> 00:14:53,360 Speaker 1: it was instantaneous. And then you take that money and 274 00:14:53,400 --> 00:14:55,200 Speaker 1: you do something else savvy with it. You buy another 275 00:14:55,240 --> 00:14:56,800 Speaker 1: closed in fund at a discount, or you buy an 276 00:14:56,800 --> 00:14:59,320 Speaker 1: open ended fun So you know, to no one in 277 00:14:59,360 --> 00:15:01,360 Speaker 1: this audience, will it be a surprise that if you 278 00:15:01,400 --> 00:15:05,560 Speaker 1: offer someone a free thirteen percent with no consequences, they're 279 00:15:05,600 --> 00:15:07,680 Speaker 1: going to want to take it. But it took me 280 00:15:07,720 --> 00:15:10,440 Speaker 1: getting to twenty nine percent for the managers to want 281 00:15:10,440 --> 00:15:11,960 Speaker 1: to do something about it. And so I sent a 282 00:15:12,000 --> 00:15:14,480 Speaker 1: letter on December eighteenth to seven of them at the 283 00:15:14,520 --> 00:15:17,800 Speaker 1: same time, saying, and you have the right in the 284 00:15:17,920 --> 00:15:20,760 Speaker 1: UK with a position size above five percent to call 285 00:15:20,760 --> 00:15:23,240 Speaker 1: an annual board meeting and they have to hear they 286 00:15:23,280 --> 00:15:25,240 Speaker 1: have to vote on any proposal. And I sent a 287 00:15:25,320 --> 00:15:29,240 Speaker 1: letter to seven funds and my proposal was replace all 288 00:15:29,280 --> 00:15:31,640 Speaker 1: of you and replace them with us. So it was 289 00:15:31,760 --> 00:15:36,840 Speaker 1: very aggressive, and they closed ranks. They did all sorts 290 00:15:36,880 --> 00:15:39,280 Speaker 1: of things to get the vote out. They did phone voting. 291 00:15:39,280 --> 00:15:41,360 Speaker 1: Can you imagine an election where you call on the 292 00:15:41,400 --> 00:15:43,760 Speaker 1: phone and you say, I don't even know what they said. 293 00:15:43,760 --> 00:15:46,440 Speaker 1: They said, we think it's better if you vote against 294 00:15:46,480 --> 00:15:48,880 Speaker 1: SABA and vote with your manager. Do you want to 295 00:15:48,880 --> 00:15:50,040 Speaker 1: do that? I don't know if they got the right 296 00:15:50,040 --> 00:15:51,360 Speaker 1: person on the phone. I don't know if they gave 297 00:15:51,360 --> 00:15:53,600 Speaker 1: me a fair hearing, but they actually took phone votes 298 00:15:53,800 --> 00:15:55,480 Speaker 1: as the main way to reach their holders, and they 299 00:15:55,520 --> 00:16:00,560 Speaker 1: defeated us on that proposal. And then the telegraph said 300 00:16:00,600 --> 00:16:02,320 Speaker 1: we need to send that American home with his tail 301 00:16:02,360 --> 00:16:05,000 Speaker 1: between his legs. And then somebody weroid, Okay, he stuck. 302 00:16:05,000 --> 00:16:05,600 Speaker 1: What's he going to do? 303 00:16:05,680 --> 00:16:06,080 Speaker 2: He lost? 304 00:16:06,120 --> 00:16:08,920 Speaker 1: What's he going to do? And I'm like, I'm not stuck. 305 00:16:09,240 --> 00:16:12,320 Speaker 1: You're stuck because now everyone knows the score is, let's 306 00:16:12,320 --> 00:16:14,640 Speaker 1: say forty two to thirty. You got forty two percent 307 00:16:14,640 --> 00:16:16,880 Speaker 1: of the vote. We got thirty. If some of you 308 00:16:16,920 --> 00:16:19,720 Speaker 1: in the audience buy this fund at minus ten, I'm 309 00:16:19,760 --> 00:16:20,960 Speaker 1: not a group with you. You go and buy it 310 00:16:20,960 --> 00:16:23,320 Speaker 1: at minus ten because you want the discount to close. 311 00:16:23,520 --> 00:16:27,000 Speaker 1: If collectively the arbitragures of the world buy ten percent 312 00:16:27,000 --> 00:16:30,040 Speaker 1: of it, my thirty is forty there, forty two is 313 00:16:30,040 --> 00:16:33,400 Speaker 1: thirty two or thirty three if they buy some unvoted chairs. 314 00:16:33,480 --> 00:16:36,800 Speaker 1: So we're in this kind of very uncomfortable spot right now. 315 00:16:36,800 --> 00:16:40,880 Speaker 1: This is very recent where there's these funds sitting out 316 00:16:40,880 --> 00:16:44,680 Speaker 1: there and everyone knows the distance between us losing in 317 00:16:44,800 --> 00:16:47,440 Speaker 1: us winning, and so I'm in negotiations with them, but 318 00:16:47,680 --> 00:16:49,520 Speaker 1: just to say, because what are we talking about is 319 00:16:49,520 --> 00:16:53,320 Speaker 1: it small potatoes? There is thirteen billion pounds on in 320 00:16:53,360 --> 00:16:57,080 Speaker 1: the UK market of just publicly traded underlyings, no illiquids 321 00:16:57,080 --> 00:16:59,600 Speaker 1: where you worry about the NAV one hundred percent public, 322 00:17:00,120 --> 00:17:03,960 Speaker 1: ninety nine percent public. Is thirteen billion pounds of trapped discount. 323 00:17:04,160 --> 00:17:07,720 Speaker 1: So if somebody snapped their fingers, Charlie Munger rest in peace, Emperor. 324 00:17:07,720 --> 00:17:10,119 Speaker 1: The world's kind of conversation. If you opened all closed 325 00:17:10,160 --> 00:17:14,120 Speaker 1: end funds that are just public, the British pensioner and 326 00:17:14,200 --> 00:17:17,240 Speaker 1: some institutions would be up thirteen billion pounds, the same 327 00:17:17,280 --> 00:17:19,440 Speaker 1: kind of number in the US. So we're talking about real, 328 00:17:19,640 --> 00:17:20,840 Speaker 1: real money. 329 00:17:20,600 --> 00:17:25,160 Speaker 3: So it's thirteen billion there, about thirteen billion here. It's 330 00:17:25,280 --> 00:17:30,440 Speaker 3: kind of unfathomable that the efficient market has not found 331 00:17:30,480 --> 00:17:35,320 Speaker 3: a way to close that gap, unless you're the actor 332 00:17:35,440 --> 00:17:40,320 Speaker 3: that is on behalf of the efficient market arbitraging the gap. 333 00:17:40,440 --> 00:17:44,359 Speaker 3: Tell us a little bit, why all this money's lying 334 00:17:44,359 --> 00:17:47,639 Speaker 3: around and nobody else has come up and closed this 335 00:17:48,200 --> 00:17:49,160 Speaker 3: discount yet. 336 00:17:49,240 --> 00:17:52,400 Speaker 1: Well, so activism is hard. You make enemies. I don't 337 00:17:52,480 --> 00:17:55,399 Speaker 1: need to be Nuvene's friend. They're down, they're down the way. 338 00:17:55,560 --> 00:17:58,439 Speaker 1: When when we had maybe there's someone here from Newvine 339 00:17:58,480 --> 00:17:58,679 Speaker 1: so I. 340 00:17:58,680 --> 00:18:02,200 Speaker 2: Can Someone's okay. 341 00:18:02,280 --> 00:18:07,280 Speaker 1: Fine, So here's what Nuvine did. Federal law in the 342 00:18:07,480 --> 00:18:10,840 Speaker 1: Investment Company Acts passing Congress in nineteen forty says, every 343 00:18:10,840 --> 00:18:11,800 Speaker 1: share gets to vote. 344 00:18:12,320 --> 00:18:13,359 Speaker 2: Every share gets to vote. 345 00:18:13,480 --> 00:18:17,880 Speaker 1: Sound good, Every share gets to vote. The lobbying industry 346 00:18:17,880 --> 00:18:22,080 Speaker 1: for the industry, got in state law something that says, well, 347 00:18:22,200 --> 00:18:24,480 Speaker 1: they can limit your vote because no one investors should 348 00:18:24,480 --> 00:18:27,240 Speaker 1: have an undue influence, you know, like we had federal 349 00:18:27,280 --> 00:18:29,840 Speaker 1: lobbying different than state law for whatever, for marijuana, for 350 00:18:29,840 --> 00:18:32,120 Speaker 1: whatever it is. You can have these at odds, and 351 00:18:32,160 --> 00:18:34,639 Speaker 1: they limited our vote. We had like twenty percent of 352 00:18:34,640 --> 00:18:36,560 Speaker 1: a fund. They only let us vote nine point nine nine. 353 00:18:36,760 --> 00:18:39,240 Speaker 1: So we went to court and the judge did not 354 00:18:39,359 --> 00:18:41,480 Speaker 1: need to hear the case. The judge decided on summary 355 00:18:41,560 --> 00:18:46,240 Speaker 1: judgment that Nouvene had broken the law and that they 356 00:18:47,520 --> 00:18:49,639 Speaker 1: hurt our ability to vote all our shares. And Nuvien 357 00:18:49,680 --> 00:18:54,200 Speaker 1: appealed and the appellate court rejected unanimously Nuvine's appeal. And 358 00:18:54,400 --> 00:18:56,720 Speaker 1: then a different manager did the same thing and we 359 00:18:56,760 --> 00:18:59,199 Speaker 1: had to take that manager to court. So you know, 360 00:18:59,720 --> 00:19:01,600 Speaker 1: it's to answer your question, it's not easy. You have 361 00:19:01,680 --> 00:19:03,200 Speaker 1: to be willing to roll up your sleeves and pay 362 00:19:03,240 --> 00:19:06,960 Speaker 1: legal bills and fight, you know those kinds of battles. 363 00:19:06,960 --> 00:19:09,800 Speaker 1: You're not just paying for one fight. It could affect 364 00:19:09,800 --> 00:19:11,800 Speaker 1: the next fifty, right if you can get the law 365 00:19:11,840 --> 00:19:15,120 Speaker 1: to change, you know, to be clear. So not everyone's 366 00:19:15,119 --> 00:19:17,320 Speaker 1: willing to be activists, and the activists are not so 367 00:19:17,440 --> 00:19:21,200 Speaker 1: happy to run a foul of the managers who they need. 368 00:19:21,200 --> 00:19:23,840 Speaker 1: If you think about an amazing manager like Blackrock, the 369 00:19:23,840 --> 00:19:26,880 Speaker 1: Biggest right, why would it make sense for an activist 370 00:19:27,000 --> 00:19:29,920 Speaker 1: to fight with Blackrock about their own closed end funds 371 00:19:29,920 --> 00:19:32,720 Speaker 1: if they need to go and lobby them on Disney 372 00:19:33,119 --> 00:19:35,600 Speaker 1: or you know whatever, Nestley, whatever it may be. So 373 00:19:35,680 --> 00:19:37,879 Speaker 1: I'm in this weird place where I'm willing to just 374 00:19:37,880 --> 00:19:40,880 Speaker 1: be an activist in my own space and asset management. 375 00:19:41,240 --> 00:19:44,520 Speaker 1: And then it's not really an arbitrage barry because these 376 00:19:44,520 --> 00:19:47,800 Speaker 1: funds can stay at discounts for decades unless someone is 377 00:19:47,840 --> 00:19:50,200 Speaker 1: going to go, you know, go to the mat and 378 00:19:51,400 --> 00:19:55,560 Speaker 1: have the buying power to get there. They are not 379 00:19:55,680 --> 00:19:58,080 Speaker 1: arbitrage is they're actually and you're you're right, I mean 380 00:19:58,200 --> 00:20:02,600 Speaker 1: a lot of there's been papers by Nobel Laureate economics 381 00:20:02,640 --> 00:20:05,359 Speaker 1: professors in Chicago about the puzzle of the closed in 382 00:20:05,400 --> 00:20:07,639 Speaker 1: fund discount. But it's not really a puzzle if you 383 00:20:07,680 --> 00:20:11,040 Speaker 1: don't have a mechanism to narrow it, and you do 384 00:20:11,280 --> 00:20:15,720 Speaker 1: the mechanism to elect a board and right now, the 385 00:20:16,840 --> 00:20:19,680 Speaker 1: industry went to the New York Stock Exchange right now 386 00:20:19,680 --> 00:20:21,679 Speaker 1: meeting the last year, and said, oh, we don't need 387 00:20:21,680 --> 00:20:24,280 Speaker 1: those board meetings anymore. And they convinced the New York 388 00:20:24,280 --> 00:20:27,280 Speaker 1: Stock Exchange to put forward a proposal to say the 389 00:20:27,320 --> 00:20:30,320 Speaker 1: board meeting is not mandatory, even though it'd been like 390 00:20:30,440 --> 00:20:33,880 Speaker 1: around for ninety years. And they kind of trick them 391 00:20:33,920 --> 00:20:37,000 Speaker 1: by saying, well, we did this for ETFs, but ETFs, 392 00:20:37,040 --> 00:20:38,959 Speaker 1: you don't need an annual board meeting because you can 393 00:20:38,960 --> 00:20:41,960 Speaker 1: always vote with your feet and exit at NAV and 394 00:20:42,000 --> 00:20:44,639 Speaker 1: closed in funds are very different. You need your voice, 395 00:20:44,680 --> 00:20:46,720 Speaker 1: you need the ability to elect a board. So the 396 00:20:46,840 --> 00:20:50,679 Speaker 1: SEC put out a twelve page paper saying this is 397 00:20:50,720 --> 00:20:53,280 Speaker 1: not going to fly, and now they're coming back with Trinevan, 398 00:20:53,400 --> 00:20:56,040 Speaker 1: a new proposal. The NYC hasn't decided yet on it, 399 00:20:56,119 --> 00:20:58,760 Speaker 1: but basically it's a very tough fight. But it's a 400 00:20:58,800 --> 00:21:01,480 Speaker 1: big fight because we're talking billions and billions of dollars 401 00:21:01,880 --> 00:21:05,520 Speaker 1: even and just recently we made a very nice deal, 402 00:21:05,600 --> 00:21:08,920 Speaker 1: mutually beneficial deal with Blackrock. We love Blackrock now they 403 00:21:08,960 --> 00:21:13,680 Speaker 1: love us, and and and So the next day two 404 00:21:13,760 --> 00:21:17,680 Speaker 1: tickers bim Easy and big Z, two tickers. The very 405 00:21:17,680 --> 00:21:20,480 Speaker 1: next day, someone's giving me a fist pump. Do you 406 00:21:20,480 --> 00:21:24,399 Speaker 1: own those tickers? Okay? Well MorphOS oh I got okay. 407 00:21:24,600 --> 00:21:28,600 Speaker 1: So the very next day those two tickers combined market 408 00:21:28,680 --> 00:21:31,280 Speaker 1: value was up two hundred million dollars. So if you 409 00:21:31,320 --> 00:21:33,679 Speaker 1: think about like somebody goes to McKinsey and they're going 410 00:21:33,760 --> 00:21:36,240 Speaker 1: to try to tweak, you know, please help our company 411 00:21:36,320 --> 00:21:38,560 Speaker 1: do like you made two hundred million dollars because they 412 00:21:38,560 --> 00:21:42,040 Speaker 1: announced a buy back tender. So there is enormous sums 413 00:21:42,040 --> 00:21:44,960 Speaker 1: of money that that gentleman and that gentleman and this 414 00:21:45,280 --> 00:21:50,800 Speaker 1: semi gentleman can can can achieve by buying discounts. It's 415 00:21:50,840 --> 00:21:53,159 Speaker 1: not that complicated. It's so much easier than what you know, 416 00:21:53,200 --> 00:21:57,359 Speaker 1: Stan Druckemeler, you know, does you buy discounts and you 417 00:21:57,400 --> 00:21:59,119 Speaker 1: buy them over and over and over again, and then 418 00:21:59,160 --> 00:22:01,600 Speaker 1: you have shares and then you vote them if they 419 00:22:01,600 --> 00:22:03,399 Speaker 1: don't do something about it, And more and more the 420 00:22:03,400 --> 00:22:04,960 Speaker 1: managers are doing something about it. So I wanted to 421 00:22:05,000 --> 00:22:06,400 Speaker 1: say to all of you, for those of you who are 422 00:22:06,400 --> 00:22:09,320 Speaker 1: not invested in this space, that it is I think 423 00:22:09,400 --> 00:22:13,199 Speaker 1: an enormous opportunity, especially when markets are a little bit 424 00:22:13,240 --> 00:22:17,760 Speaker 1: expensive to a lot expensive, to try to earn a 425 00:22:17,920 --> 00:22:20,560 Speaker 1: very nice return from something that doesn't require the market 426 00:22:20,560 --> 00:22:20,959 Speaker 1: to go up. 427 00:22:21,000 --> 00:22:23,000 Speaker 3: So I want to talk a couple of things about that. 428 00:22:23,040 --> 00:22:25,399 Speaker 3: I want to talk about what you're buying, but I 429 00:22:25,440 --> 00:22:28,920 Speaker 3: also want to talk about the difference from when you're 430 00:22:28,960 --> 00:22:33,640 Speaker 3: a two billion dollar NAT annoying the big closed end 431 00:22:33,640 --> 00:22:37,160 Speaker 3: funds to a seven billion dollar Hey, we could take 432 00:22:37,200 --> 00:22:40,359 Speaker 3: a substantial position in this fund. We could take fifty 433 00:22:40,400 --> 00:22:43,399 Speaker 3: one percent and vote you out. Tell us how the 434 00:22:44,840 --> 00:22:48,920 Speaker 3: process has changed as you've accumulated more assets under management? 435 00:22:49,200 --> 00:22:52,679 Speaker 3: Are they taking you more seriously? The fact that Blackrock 436 00:22:53,119 --> 00:22:58,560 Speaker 3: cut a mutually beneficial deal with you sounds like, oh, 437 00:22:58,680 --> 00:23:01,879 Speaker 3: boaz is kind of a pain. Let's just let's just 438 00:23:01,920 --> 00:23:04,960 Speaker 3: hear them out. Has it changed over the past decade? 439 00:23:05,320 --> 00:23:08,040 Speaker 1: Well, look, they know that they their shareolders made two 440 00:23:08,080 --> 00:23:10,320 Speaker 1: hundred million dollars the next day. And actually that's not 441 00:23:10,359 --> 00:23:13,919 Speaker 1: even all of it, because the act of tendering is 442 00:23:13,920 --> 00:23:16,359 Speaker 1: not even hasn't even occurred. So it was like an 443 00:23:16,400 --> 00:23:18,200 Speaker 1: initial gain, and then there's some more gain to come 444 00:23:18,240 --> 00:23:20,679 Speaker 1: between the end of this month and I think May 445 00:23:20,760 --> 00:23:23,200 Speaker 1: or June for the second fund, so it's real sums 446 00:23:23,200 --> 00:23:23,600 Speaker 1: of money. 447 00:23:23,800 --> 00:23:24,560 Speaker 2: They can look good. 448 00:23:25,440 --> 00:23:29,360 Speaker 1: We had a very actually very professional negotiation with them, 449 00:23:29,480 --> 00:23:32,520 Speaker 1: and we're very happy with the tone in both directions. 450 00:23:32,800 --> 00:23:36,240 Speaker 1: So what they are doing separate from us is I 451 00:23:36,320 --> 00:23:40,199 Speaker 1: think they've decided that these discounts are not worth the 452 00:23:40,720 --> 00:23:44,240 Speaker 1: damage to the brand. I'm not talking about that manager particularly, 453 00:23:44,320 --> 00:23:46,320 Speaker 1: there are a couple of managers who are now doing 454 00:23:46,400 --> 00:23:49,040 Speaker 1: things like if you look at the yield on closed 455 00:23:49,080 --> 00:23:50,960 Speaker 1: in funds one year ago or a year and a 456 00:23:51,000 --> 00:23:53,560 Speaker 1: half ago versus now, it actually went up three hundred 457 00:23:53,560 --> 00:23:55,760 Speaker 1: basis points even though rates didn't go up. The reason 458 00:23:55,800 --> 00:23:58,120 Speaker 1: they went up three hundred basis points is the manager 459 00:23:58,160 --> 00:24:02,360 Speaker 1: decided to bump up the distribution. And I'm of two 460 00:24:02,440 --> 00:24:05,200 Speaker 1: minds about it, because there are some funds that used 461 00:24:05,200 --> 00:24:07,639 Speaker 1: to have a six percent distribution and went all the 462 00:24:07,680 --> 00:24:09,320 Speaker 1: way to twenty or fourteen. 463 00:24:10,119 --> 00:24:11,720 Speaker 2: So it seems a little bit like. 464 00:24:13,280 --> 00:24:15,199 Speaker 1: A little bit I don't know what the word is, 465 00:24:15,240 --> 00:24:17,120 Speaker 1: but like if one day you're able to pay six, 466 00:24:17,119 --> 00:24:18,679 Speaker 1: then all of a sudden you're able to pay twenty 467 00:24:18,960 --> 00:24:21,800 Speaker 1: Do you think that the dentist, the really nice dentist 468 00:24:21,840 --> 00:24:26,280 Speaker 1: who you know, has a chain of dental establishments, understands 469 00:24:26,320 --> 00:24:29,120 Speaker 1: that that fourteen is a return of your own money. 470 00:24:29,280 --> 00:24:31,440 Speaker 1: Could you put a dollar in the assets are only 471 00:24:31,480 --> 00:24:34,520 Speaker 1: earning six, they're giving you six, but then the next 472 00:24:34,600 --> 00:24:37,080 Speaker 1: day they're starting to give you twenty. What's that fourteen? 473 00:24:37,119 --> 00:24:39,000 Speaker 1: That fourteen is your own dollar coming back to you. 474 00:24:39,480 --> 00:24:41,800 Speaker 1: And what happens is and you guys will know this. 475 00:24:41,840 --> 00:24:43,600 Speaker 1: People will go in morning Star and they'll sort by 476 00:24:43,680 --> 00:24:46,000 Speaker 1: yields and we'll say, amazing, look at this manager, and 477 00:24:46,000 --> 00:24:47,480 Speaker 1: I get to have twenty percent, and I get to 478 00:24:47,520 --> 00:24:50,399 Speaker 1: have growth equities. Sounds like the greatest thing ever. And 479 00:24:50,840 --> 00:24:53,320 Speaker 1: they will bid up those closed in funds and the 480 00:24:53,359 --> 00:24:55,600 Speaker 1: discount starts to go away. And there's some of them 481 00:24:55,600 --> 00:24:58,919 Speaker 1: that even traded a premium, and so that's all fine, 482 00:24:59,320 --> 00:25:02,240 Speaker 1: but they're there's no alchemy in finance. And at some point, 483 00:25:02,280 --> 00:25:04,200 Speaker 1: if they cut that dividend again, you can have a 484 00:25:04,240 --> 00:25:06,720 Speaker 1: fifteen percent loss, twenty percent loss in a single day. 485 00:25:06,920 --> 00:25:08,680 Speaker 1: Otherwise that fund is just going to shrink and shrink 486 00:25:08,720 --> 00:25:11,280 Speaker 1: and shrink, because it's shrinking by that fourteen every year. 487 00:25:11,520 --> 00:25:14,359 Speaker 1: So so, but just to say, managers now are taking 488 00:25:14,400 --> 00:25:17,719 Speaker 1: steps without us to return capital to investors at an 489 00:25:17,760 --> 00:25:22,840 Speaker 1: ev through over dividending, through tendering, through other discount management plans, 490 00:25:22,880 --> 00:25:25,640 Speaker 1: and in the UK, to their credit, they actually are 491 00:25:25,720 --> 00:25:29,679 Speaker 1: replacing managers that have underperformed with better managers and that 492 00:25:29,720 --> 00:25:33,160 Speaker 1: can cause the funds to trade better. So so I 493 00:25:33,320 --> 00:25:35,800 Speaker 1: like it because it helps my existing portfolio. You know, 494 00:25:35,840 --> 00:25:38,080 Speaker 1: I do wonder, well, what if this whole thing goes away? 495 00:25:38,280 --> 00:25:41,000 Speaker 1: You know, that's kind of an interesting topic, but it's 496 00:25:41,000 --> 00:25:43,480 Speaker 1: been around for this discount for a century. I don't 497 00:25:43,480 --> 00:25:45,560 Speaker 1: think even with these steps, I don't think it's going away. 498 00:25:46,200 --> 00:25:49,640 Speaker 3: And what are in these closed end funds? Is it bonds? 499 00:25:49,720 --> 00:25:53,080 Speaker 3: Is it equities? Is it convertibles? What are the publicly 500 00:25:53,160 --> 00:25:57,320 Speaker 3: traded and traded holdings that these closed end funds tend 501 00:25:57,320 --> 00:25:57,720 Speaker 3: to hold? 502 00:25:58,160 --> 00:26:02,600 Speaker 1: Right, So I'm not going to recommend my own fund overtly. 503 00:26:02,600 --> 00:26:04,680 Speaker 1: I'm going to do it telepathically to all of you, okay, 504 00:26:04,720 --> 00:26:07,520 Speaker 1: because I can't overtly tell you to go invest, you know, 505 00:26:07,600 --> 00:26:10,240 Speaker 1: just let me do it and you relax at the beach. 506 00:26:10,440 --> 00:26:13,040 Speaker 1: But I'm going to recommend another fund because I do 507 00:26:13,119 --> 00:26:15,040 Speaker 1: want to give a ticker. You know, it's kind of 508 00:26:15,080 --> 00:26:16,520 Speaker 1: the right, you know, nice thing to do, and it's 509 00:26:16,520 --> 00:26:19,800 Speaker 1: actually a fun I recommended some months ago at Grants. 510 00:26:20,400 --> 00:26:23,960 Speaker 1: I spoke at Jim Grant's like conference, and at the 511 00:26:23,960 --> 00:26:25,560 Speaker 1: time we had a two percent position, so we were 512 00:26:25,600 --> 00:26:28,120 Speaker 1: really quite small, but I didn't mind recommending it, even 513 00:26:28,119 --> 00:26:30,360 Speaker 1: though we're buying it. We now have a seven percent position, 514 00:26:30,960 --> 00:26:35,840 Speaker 1: and the ticker is g DV like gold does vary. 515 00:26:35,960 --> 00:26:37,560 Speaker 1: I don't know, someone have a better one from that, 516 00:26:38,160 --> 00:26:42,600 Speaker 1: And it's a Gabelly fund. And Gabelly has a number 517 00:26:42,600 --> 00:26:45,879 Speaker 1: of funds that traded premiums to NAV. What premiums ten 518 00:26:45,920 --> 00:26:48,000 Speaker 1: AV like, you know, even one of them has a 519 00:26:48,040 --> 00:26:50,920 Speaker 1: sixty percent premium, so you can have funds at premiums also, 520 00:26:51,040 --> 00:26:53,520 Speaker 1: which is another story. But this fund's at a double 521 00:26:53,520 --> 00:26:55,840 Speaker 1: digit discount. It's at a thirteen discount. So you have 522 00:26:56,080 --> 00:26:58,800 Speaker 1: a fund whose biggest holding is American Express, it's got 523 00:26:58,880 --> 00:27:02,800 Speaker 1: JP Morgan, it's got Google. I believe, it's got those 524 00:27:02,880 --> 00:27:06,639 Speaker 1: kinds of stocks. And it's three billion. But if it 525 00:27:06,680 --> 00:27:08,520 Speaker 1: was at NAV, it would be thirty it would be 526 00:27:08,520 --> 00:27:11,280 Speaker 1: fourteen percent more than three billion, So you were talking 527 00:27:11,280 --> 00:27:15,919 Speaker 1: literally about four hundred million dollars to shareholders if it 528 00:27:15,960 --> 00:27:18,240 Speaker 1: was open ended or if they somehow found a way 529 00:27:18,240 --> 00:27:19,240 Speaker 1: to erase the discounts. 530 00:27:19,280 --> 00:27:21,080 Speaker 2: So I like it because it's nice. 531 00:27:20,840 --> 00:27:22,720 Speaker 1: To be able to take a two hundred million dollar 532 00:27:22,800 --> 00:27:26,439 Speaker 1: position in something, and we have positions as big as 533 00:27:26,440 --> 00:27:28,840 Speaker 1: four hundred and fifty million single funds. But so that's 534 00:27:28,880 --> 00:27:30,280 Speaker 1: one that you know a lot of people here could 535 00:27:30,280 --> 00:27:33,399 Speaker 1: buy at minus thirteen. You like the portfolio. The fees 536 00:27:33,440 --> 00:27:36,480 Speaker 1: are high because these fees were set long ago. There 537 00:27:36,480 --> 00:27:38,119 Speaker 1: are about one hundred and twenty BIPs, So I have 538 00:27:38,200 --> 00:27:41,159 Speaker 1: to think about that. But there is a lot to 539 00:27:41,200 --> 00:27:43,840 Speaker 1: do in the US and the UK right now, especially 540 00:27:43,880 --> 00:27:47,600 Speaker 1: because the speed at which we're narrowing discounts has gone faster. 541 00:27:48,240 --> 00:27:52,200 Speaker 3: So you mentioned you just alluded to something I want 542 00:27:52,200 --> 00:27:54,920 Speaker 3: to follow up on. There are five hundred or so 543 00:27:55,040 --> 00:27:58,960 Speaker 3: closed end funds between the US and the UK. About 544 00:27:59,000 --> 00:28:01,800 Speaker 3: if I recall you saying this correctly, about one hundred 545 00:28:01,800 --> 00:28:06,280 Speaker 3: of them trade at a double digit discount to nav 546 00:28:07,440 --> 00:28:10,399 Speaker 3: How long can this go on for? Are you gonna 547 00:28:10,800 --> 00:28:13,639 Speaker 3: put yourself out of business by creating all this value 548 00:28:14,160 --> 00:28:17,160 Speaker 3: or is this something that is going to persist forever? 549 00:28:17,920 --> 00:28:22,040 Speaker 1: So when these funds are not trading in discounts, the 550 00:28:22,080 --> 00:28:25,600 Speaker 1: market can grow. They do secondary offerings, they bring new 551 00:28:25,640 --> 00:28:31,240 Speaker 1: IPOs for that new hottest esg. You know, tech, whatever 552 00:28:31,280 --> 00:28:34,240 Speaker 1: it may be, whatever the the thing that is sellable, 553 00:28:34,680 --> 00:28:37,639 Speaker 1: and and so there there have been a shrinkage in 554 00:28:37,680 --> 00:28:39,680 Speaker 1: the number of funds, but that's generally because of merger. 555 00:28:40,760 --> 00:28:42,960 Speaker 1: I don't believe I'm gonna put myself out of business 556 00:28:42,960 --> 00:28:45,440 Speaker 1: because because as much as big as we are at 557 00:28:45,440 --> 00:28:48,120 Speaker 1: seven billion, again it's five hundred, so we're now we 558 00:28:48,240 --> 00:28:52,000 Speaker 1: are seven out of a much smaller set of interesting funds. 559 00:28:52,920 --> 00:28:55,760 Speaker 1: But lo and behold, if the market sells off, you know, 560 00:28:55,800 --> 00:28:57,720 Speaker 1: I'm not gonna be able to keep to keep it 561 00:28:58,120 --> 00:29:01,239 Speaker 1: from from selling off in my names either. And like 562 00:29:01,280 --> 00:29:04,960 Speaker 1: when twenty twenty happened, all of a sudden, almost every 563 00:29:05,000 --> 00:29:09,200 Speaker 1: fund was interesting. And that's the thing is if a 564 00:29:09,240 --> 00:29:12,120 Speaker 1: funds at minus fourteen and you have a big sell off, yeah, 565 00:29:12,120 --> 00:29:15,120 Speaker 1: it can go to minus twenty usually comes back pretty quickly. 566 00:29:15,360 --> 00:29:16,840 Speaker 1: If it's at minus one and you have a big 567 00:29:16,880 --> 00:29:19,280 Speaker 1: sell off, it can go to minus twenty just as quickly. 568 00:29:19,320 --> 00:29:22,360 Speaker 1: And so there isn't a safety net where you would 569 00:29:22,360 --> 00:29:24,640 Speaker 1: have people to catch it. You know, people say wow, 570 00:29:24,720 --> 00:29:27,440 Speaker 1: at minus six sixteen seventeen. I like it even more so. 571 00:29:27,560 --> 00:29:30,240 Speaker 1: I do think all sorts of funds that we were 572 00:29:30,400 --> 00:29:33,080 Speaker 1: historically activist in or not. One of them, by the way, 573 00:29:33,400 --> 00:29:35,640 Speaker 1: is a fun we were activist in that we shrunk 574 00:29:35,880 --> 00:29:39,520 Speaker 1: it shrunk. It's trading now at plus one, and they've 575 00:29:39,560 --> 00:29:42,800 Speaker 1: done two rights offerings. They've grown that fund. So I 576 00:29:42,800 --> 00:29:45,520 Speaker 1: think the industry when it's not at a discount, can issue. 577 00:29:45,840 --> 00:29:48,080 Speaker 1: When it is at a discount, it needs us even more. 578 00:29:48,400 --> 00:29:51,240 Speaker 1: And we also, even when it's in the normal state, 579 00:29:51,440 --> 00:29:54,360 Speaker 1: are cleaning up the weakest, biggest discounts. And I think, 580 00:29:54,640 --> 00:29:57,240 Speaker 1: you know, ironically, we're in some ways an ally of 581 00:29:57,240 --> 00:30:00,400 Speaker 1: the industry, even as an activist, because we're making it 582 00:30:00,480 --> 00:30:03,640 Speaker 1: possible for them to bring new funds. You all obviously 583 00:30:03,680 --> 00:30:06,320 Speaker 1: followed the saga of Bill Ackman trying to bring a 584 00:30:06,360 --> 00:30:08,840 Speaker 1: twenty five billion dollar closed INN fund. If you, you know, 585 00:30:08,880 --> 00:30:11,720 Speaker 1: think about location, location, location for real estate, what is 586 00:30:11,760 --> 00:30:15,240 Speaker 1: the reason why he couldn't bring a twenty five billion 587 00:30:15,400 --> 00:30:18,800 Speaker 1: or even a much smaller closed n fund discount discount discount. 588 00:30:18,840 --> 00:30:21,280 Speaker 1: People were worried, if I buy it at IPO, what 589 00:30:21,320 --> 00:30:23,320 Speaker 1: if it goes to a discount, I'll look silly. What's 590 00:30:23,320 --> 00:30:25,200 Speaker 1: the mechanism to stop it from going to one hundred 591 00:30:25,240 --> 00:30:29,480 Speaker 1: to ninety? And maybe that's even not an unlikely case. 592 00:30:29,520 --> 00:30:33,680 Speaker 1: And so the protecting against the discount, having a having 593 00:30:33,720 --> 00:30:36,400 Speaker 1: a discount management policy. If it ever gets to X, 594 00:30:36,400 --> 00:30:38,680 Speaker 1: I'll buy it back, that kind of thing. I think 595 00:30:38,680 --> 00:30:41,520 Speaker 1: that's the way forward for the industry to be able 596 00:30:41,560 --> 00:30:44,480 Speaker 1: to issue more of these things. But it is challenged 597 00:30:44,560 --> 00:30:46,760 Speaker 1: because you all know as well as I do about 598 00:30:46,800 --> 00:30:50,640 Speaker 1: actively managed mutual funds, low cost ttfs, and so you 599 00:30:50,640 --> 00:30:52,320 Speaker 1: know there is some theory, like when Heard on the 600 00:30:52,320 --> 00:30:56,360 Speaker 1: Street wrote about my case in London, the journalist is 601 00:30:56,360 --> 00:30:58,520 Speaker 1: basically like, what do we need these things for now? 602 00:30:58,840 --> 00:31:02,040 Speaker 1: That offended a lot out of the UK market. Some 603 00:31:02,120 --> 00:31:03,880 Speaker 1: of them are not needed, Some of them that have 604 00:31:03,920 --> 00:31:06,400 Speaker 1: truly liquid assets are needed because an ETF would be 605 00:31:06,440 --> 00:31:08,440 Speaker 1: the wrong rapper for it. So I do think there 606 00:31:08,480 --> 00:31:11,680 Speaker 1: is a home for closed end funds and I can't 607 00:31:11,680 --> 00:31:15,320 Speaker 1: get enough of them. I like, really, for twelve years, 608 00:31:15,360 --> 00:31:19,760 Speaker 1: have just been interested in the house and wise it 609 00:31:19,840 --> 00:31:22,560 Speaker 1: changes what regions, what product types. Right now, the most 610 00:31:22,600 --> 00:31:25,520 Speaker 1: interesting are equities. You're asking, you know, just run of 611 00:31:25,560 --> 00:31:29,400 Speaker 1: the mill public equities, and the UK is more interesting 612 00:31:29,760 --> 00:31:32,760 Speaker 1: on average because the governance is better. 613 00:31:33,400 --> 00:31:37,640 Speaker 3: So look the name of your ETF. The symbol is 614 00:31:37,760 --> 00:31:42,720 Speaker 3: CEFS closed end funds, but you ended up taking over 615 00:31:42,960 --> 00:31:47,080 Speaker 3: to closed end funds yourself as managers. Tell us about those? 616 00:31:47,600 --> 00:31:51,280 Speaker 3: How did you end up running these? And what's the 617 00:31:51,360 --> 00:31:54,280 Speaker 3: performance been? Like, what's the discount look like today? 618 00:31:55,200 --> 00:32:00,280 Speaker 1: So there is a manager Voya that had a fund. 619 00:32:00,440 --> 00:32:04,080 Speaker 1: Seeing some heads nod, and we bought twenty four percent 620 00:32:04,080 --> 00:32:06,560 Speaker 1: of the fund. There was an election coming up, and 621 00:32:07,040 --> 00:32:10,000 Speaker 1: some days before the election, they announced that for the 622 00:32:10,000 --> 00:32:14,479 Speaker 1: better of shareholders, they thought the board thought that instead 623 00:32:14,480 --> 00:32:18,040 Speaker 1: of us just needing the majority of the votes, which 624 00:32:18,080 --> 00:32:21,800 Speaker 1: is usually I think about elections, you know, we would 625 00:32:21,800 --> 00:32:24,880 Speaker 1: need sixty percent. But it wasn't even only that. We 626 00:32:24,880 --> 00:32:27,440 Speaker 1: wouldn't need sixty percent of the votes. We would need 627 00:32:27,480 --> 00:32:30,880 Speaker 1: sixty percent of all shares voted or unvoted. And I 628 00:32:30,920 --> 00:32:32,920 Speaker 1: think they got something like fifty six percent to vote, 629 00:32:32,920 --> 00:32:35,200 Speaker 1: so we would needed like sixty We needed more than 630 00:32:35,200 --> 00:32:38,520 Speaker 1: every vote, Okay, So we took them to court. It 631 00:32:38,600 --> 00:32:42,560 Speaker 1: was in Arizona, And you know, it's always funny, like 632 00:32:42,640 --> 00:32:45,360 Speaker 1: if you've been in legal disputes and discovery, you're like, 633 00:32:45,520 --> 00:32:47,520 Speaker 1: wait a second, how would you do that knowing that 634 00:32:47,560 --> 00:32:51,440 Speaker 1: we would get to see the source documents, And there 635 00:32:51,520 --> 00:32:57,240 Speaker 1: was some documentation that they were worried about losing the 636 00:32:57,280 --> 00:33:00,680 Speaker 1: AUM to our action, and it was really too entrench 637 00:33:00,760 --> 00:33:02,959 Speaker 1: which the board is supposed to be working for shareholders. 638 00:33:03,160 --> 00:33:05,120 Speaker 1: It seems like they're working for Voya. So we took 639 00:33:05,160 --> 00:33:08,360 Speaker 1: them to court and we won, and Voya resigned as 640 00:33:08,440 --> 00:33:10,960 Speaker 1: manager and they said they'll stay as manager until we 641 00:33:11,000 --> 00:33:13,880 Speaker 1: can find a new one, and we changed the mandate Barry. 642 00:33:14,120 --> 00:33:17,280 Speaker 1: It was all hygold loans, and in a very opportune time, 643 00:33:17,320 --> 00:33:19,680 Speaker 1: we sold all high lod loans between June of twenty 644 00:33:19,720 --> 00:33:21,920 Speaker 1: one when we took it over and the start of 645 00:33:21,960 --> 00:33:24,920 Speaker 1: the twenty twenty two bear market, and we replaced it 646 00:33:25,480 --> 00:33:27,600 Speaker 1: even yield. So sell a single B loan or a 647 00:33:27,600 --> 00:33:31,680 Speaker 1: double B loan at three fifty over library it was 648 00:33:31,680 --> 00:33:35,800 Speaker 1: called at the time, and sell it at three fifty 649 00:33:35,800 --> 00:33:39,440 Speaker 1: over and then buy a spack at three fifty over 650 00:33:39,480 --> 00:33:40,760 Speaker 1: because they were trading at a three and a half 651 00:33:40,800 --> 00:33:43,840 Speaker 1: point discount to their one year maturity date, and you 652 00:33:43,880 --> 00:33:46,720 Speaker 1: would basically still earn your three fifty but you would 653 00:33:46,760 --> 00:33:49,480 Speaker 1: have gone from single double B loans to triple at 654 00:33:49,640 --> 00:33:51,480 Speaker 1: bills in a box at you know, JP Morgan or 655 00:33:51,520 --> 00:33:54,360 Speaker 1: Bank America. And then twenty twenty two appened and we 656 00:33:54,360 --> 00:33:56,400 Speaker 1: were out of two hundred and fifty seven closed in funds, 657 00:33:56,440 --> 00:33:59,120 Speaker 1: we were the number one performer. So we got very lucky. 658 00:33:59,280 --> 00:34:00,640 Speaker 1: I'm not going to be able to do that magic 659 00:34:00,640 --> 00:34:02,400 Speaker 1: trick again. And you know, I would have been very 660 00:34:02,400 --> 00:34:04,280 Speaker 1: happy to be twenty fifth out of two fifty, but 661 00:34:04,280 --> 00:34:05,320 Speaker 1: instead we were first. 662 00:34:05,400 --> 00:34:07,440 Speaker 2: So you know, it did not change. 663 00:34:07,480 --> 00:34:09,879 Speaker 1: Our fund is still trading at a discount, trading at 664 00:34:09,880 --> 00:34:11,680 Speaker 1: like a one of them's at a seven, one of 665 00:34:11,680 --> 00:34:14,400 Speaker 1: them's at a nine, but single digit discounts. But what 666 00:34:14,480 --> 00:34:17,160 Speaker 1: I want to tell you is that my general counsel said, 667 00:34:17,960 --> 00:34:20,160 Speaker 1: I'm going to spare you the second story. Do we 668 00:34:20,200 --> 00:34:21,719 Speaker 1: really want to run one of these? Because what if 669 00:34:21,760 --> 00:34:23,319 Speaker 1: we do badly? And what if they say, you see, 670 00:34:23,320 --> 00:34:26,359 Speaker 1: it's not so easy. And I said, I really want 671 00:34:26,400 --> 00:34:28,520 Speaker 1: to run it to show that there is a better way. 672 00:34:28,719 --> 00:34:30,960 Speaker 1: I'm going to change the governance how votes are cast 673 00:34:32,160 --> 00:34:35,120 Speaker 1: to be friendly to the shareholder. So it used to 674 00:34:35,200 --> 00:34:38,319 Speaker 1: be that let's say the election was staggered, We're going 675 00:34:38,400 --> 00:34:39,799 Speaker 1: to do it all in one year, so you can 676 00:34:40,040 --> 00:34:42,720 Speaker 1: you can get us all out in one period, change 677 00:34:42,920 --> 00:34:44,839 Speaker 1: change it in other ways, and we're going to offer 678 00:34:44,880 --> 00:34:47,719 Speaker 1: shareholders and exit near nav and we did that in 679 00:34:47,760 --> 00:34:50,319 Speaker 1: both funds, so something that you know, we're often not 680 00:34:50,400 --> 00:34:52,400 Speaker 1: able to get the managers to do with that coercion. 681 00:34:52,480 --> 00:34:56,399 Speaker 1: So so I run two funds. The tickers are SABA 682 00:34:56,640 --> 00:34:59,520 Speaker 1: and BRW and but you know, sometimes people look at 683 00:34:59,560 --> 00:35:01,920 Speaker 1: the tracker and they don't realize we only took one 684 00:35:01,960 --> 00:35:04,400 Speaker 1: of them over a year ago, fourteen months ago, and 685 00:35:04,440 --> 00:35:07,759 Speaker 1: one of them about three and three quarter years ago, 686 00:35:07,880 --> 00:35:11,480 Speaker 1: So that's been great. We changed the investment type to 687 00:35:11,560 --> 00:35:14,560 Speaker 1: include SPACs, but right now they mainly own closed in funds, 688 00:35:14,600 --> 00:35:16,840 Speaker 1: So I have a product which is closed in funds 689 00:35:16,840 --> 00:35:19,040 Speaker 1: mainly of closed in funds. And what's kind of fun 690 00:35:19,040 --> 00:35:22,759 Speaker 1: about that is I took their capital and now I 691 00:35:22,760 --> 00:35:26,680 Speaker 1: have their capital working against them because I'm buying their 692 00:35:26,680 --> 00:35:29,800 Speaker 1: own funds with that capital to then vote against management 693 00:35:30,120 --> 00:35:32,640 Speaker 1: and hopefully get all of you and me anyvy. And 694 00:35:32,680 --> 00:35:35,279 Speaker 1: that's been really fun again because I don't have to 695 00:35:35,400 --> 00:35:38,160 Speaker 1: read the Wall Street Journal. I mean, I have other 696 00:35:38,160 --> 00:35:40,160 Speaker 1: reasons to read it, but this is a space where like, 697 00:35:40,960 --> 00:35:42,920 Speaker 1: can you turn eighty five cents back into a dollar? 698 00:35:43,080 --> 00:35:46,040 Speaker 1: Or not, And it's it's just a it's it's it's 699 00:35:46,080 --> 00:35:49,000 Speaker 1: not easy, but it's it's totally different than regular investing. 700 00:35:49,239 --> 00:35:52,279 Speaker 3: So I want to sum up your part of your 701 00:35:52,280 --> 00:35:57,080 Speaker 3: investing philosophy as a statement you once made, I don't 702 00:35:57,120 --> 00:36:02,600 Speaker 3: make directional bets. I make miss price bets. And that's 703 00:36:02,640 --> 00:36:07,160 Speaker 3: a huge change of perspective. How a lot of people 704 00:36:07,200 --> 00:36:11,680 Speaker 3: in finance bet deep down inside? Doesn't that mean that 705 00:36:11,760 --> 00:36:15,680 Speaker 3: you're just a value investors? Is that the space is? 706 00:36:15,760 --> 00:36:17,239 Speaker 3: Are those the waters you swim in? 707 00:36:18,719 --> 00:36:21,160 Speaker 2: Yeah? But I'm never well by the way. 708 00:36:21,400 --> 00:36:23,799 Speaker 1: Those three funds you know, have beta to them, but 709 00:36:23,880 --> 00:36:26,279 Speaker 1: most of my assets are are hedged, and I even 710 00:36:26,320 --> 00:36:29,960 Speaker 1: managed tail protection money for different pension funds. I think 711 00:36:29,960 --> 00:36:33,040 Speaker 1: people are a product of their vintage, you know, like 712 00:36:33,080 --> 00:36:34,799 Speaker 1: when you hear about your grandfather grew up in the 713 00:36:34,800 --> 00:36:37,200 Speaker 1: war and whatever and that's why he's all cranky or whatever. 714 00:36:37,239 --> 00:36:39,160 Speaker 1: But you know, I grew up in a period of war. 715 00:36:39,200 --> 00:36:41,920 Speaker 1: For the markets, I had a trading book in nineteen 716 00:36:42,000 --> 00:36:44,440 Speaker 1: ninety eight, right when Russia was defaulting, and then like 717 00:36:44,440 --> 00:36:46,880 Speaker 1: three years later was you know, Enron, and then was 718 00:36:46,960 --> 00:36:48,839 Speaker 1: nine to eleven like two months after that, and six 719 00:36:48,880 --> 00:36:52,120 Speaker 1: months after that was WORLDCLM. So, so my vintage was 720 00:36:52,160 --> 00:36:55,160 Speaker 1: not to be directionally long, and it was not even 721 00:36:55,200 --> 00:36:57,880 Speaker 1: in my makeup. It was more to be an arbit treasurer. 722 00:36:58,680 --> 00:37:03,680 Speaker 1: Isn't that value? Yeah, arbitray is value. But I also 723 00:37:04,239 --> 00:37:06,120 Speaker 1: think you have to find like your niche and where 724 00:37:06,120 --> 00:37:11,280 Speaker 1: you're comfortable, and I'm most comfortable where a is mispriced 725 00:37:11,320 --> 00:37:13,879 Speaker 1: to be and and I can actually put both legs 726 00:37:13,880 --> 00:37:14,400 Speaker 1: of the trade on. 727 00:37:15,000 --> 00:37:17,480 Speaker 3: So in the last two minutes or so we have 728 00:37:18,080 --> 00:37:22,000 Speaker 3: I want to talk about your ETF because it's relatively 729 00:37:22,280 --> 00:37:25,520 Speaker 3: new to see somebody with your background in that space 730 00:37:26,200 --> 00:37:30,040 Speaker 3: ce f s. Who are the buyers of closed end 731 00:37:30,160 --> 00:37:35,400 Speaker 3: funds ETF and what's what's the investment target? What are 732 00:37:35,440 --> 00:37:38,520 Speaker 3: you looking to generate in a fund like that? And 733 00:37:38,560 --> 00:37:39,799 Speaker 3: then what are the holdings? 734 00:37:40,160 --> 00:37:43,040 Speaker 1: Yeah, so I'll be a little careful because I don't 735 00:37:43,040 --> 00:37:43,400 Speaker 1: know exactly. 736 00:37:43,400 --> 00:37:45,600 Speaker 2: I don't I don't want to market. Okay, you're you're, 737 00:37:45,880 --> 00:37:47,600 Speaker 2: You're I'm asking question. 738 00:37:48,080 --> 00:37:52,080 Speaker 3: I'm asking because I'm fascinated by this product. And anytime 739 00:37:52,200 --> 00:37:55,560 Speaker 3: there's an opportunity to say to clients, hey, we're going 740 00:37:55,640 --> 00:37:59,040 Speaker 3: to try and get you equity like returns with bond 741 00:37:59,120 --> 00:38:02,360 Speaker 3: like risks, people sit up to pay attention. There aren't 742 00:38:02,360 --> 00:38:06,920 Speaker 3: a lot of credible products from managers I could market 743 00:38:07,040 --> 00:38:09,560 Speaker 3: for you. There aren't a lot of credible products from 744 00:38:09,600 --> 00:38:12,799 Speaker 3: managers with as long a track record as you've amassed 745 00:38:13,320 --> 00:38:17,880 Speaker 3: that people don't really know about. This is a relatively 746 00:38:17,960 --> 00:38:20,360 Speaker 3: unknown product that really checks the bout. 747 00:38:20,440 --> 00:38:23,160 Speaker 1: All right, And to just to as a disclaimer, we've 748 00:38:23,200 --> 00:38:25,239 Speaker 1: owned it in some periods almost all fixed income, and 749 00:38:25,280 --> 00:38:28,920 Speaker 1: now we happen to own mostly equities, so it's not 750 00:38:29,000 --> 00:38:32,080 Speaker 1: bond like risk, it's bond and equity like risk. Let's say, so, 751 00:38:33,360 --> 00:38:35,640 Speaker 1: we've seen it grow every year. We had no distribution plan, 752 00:38:35,800 --> 00:38:38,319 Speaker 1: we had no distribution. It started with like a couple 753 00:38:38,320 --> 00:38:40,480 Speaker 1: of million dollars and maybe it's now two hundred and 754 00:38:40,480 --> 00:38:43,520 Speaker 1: fifty five or so. It gets creations every few days. 755 00:38:44,200 --> 00:38:46,760 Speaker 1: So I think some value investors have thought to say, Okay, 756 00:38:46,880 --> 00:38:49,440 Speaker 1: I know this is a space that's interesting, and I 757 00:38:49,440 --> 00:38:51,839 Speaker 1: have to state your track record. And instead of buying 758 00:38:51,880 --> 00:38:53,600 Speaker 1: it after I read that Saba about it, why don't 759 00:38:53,600 --> 00:38:56,200 Speaker 1: I just give it to SABA and let them do 760 00:38:56,280 --> 00:38:56,640 Speaker 1: their thing. 761 00:38:57,239 --> 00:38:58,480 Speaker 2: That's the name of my firm. 762 00:38:59,080 --> 00:39:03,960 Speaker 1: So so I think it's got a pretty dispersed shareholder base. 763 00:39:05,120 --> 00:39:09,880 Speaker 1: These products have grown. There's one I think that Amplify has. 764 00:39:09,920 --> 00:39:11,600 Speaker 1: I think to take her for that's wyy why And 765 00:39:11,640 --> 00:39:14,040 Speaker 1: I think it grew over the same period more than 766 00:39:14,080 --> 00:39:16,319 Speaker 1: we grew, and it again had you know, less than 767 00:39:16,320 --> 00:39:18,319 Speaker 1: one third of the return that we had. So I 768 00:39:18,360 --> 00:39:21,480 Speaker 1: do look at the market as highly inefficient. That you know, 769 00:39:21,480 --> 00:39:23,000 Speaker 1: if you have somebody doing something for eight years and 770 00:39:23,480 --> 00:39:25,840 Speaker 1: is very similar to someone else in one made twelve, 771 00:39:25,840 --> 00:39:28,040 Speaker 1: one made four, it doesn't you would think by year 772 00:39:28,120 --> 00:39:30,520 Speaker 1: seven or something, you know, you would start to out 773 00:39:31,200 --> 00:39:33,520 Speaker 1: raise them. I'm not very focused on how big it 774 00:39:33,560 --> 00:39:35,960 Speaker 1: gets because almost all of our AUM is in our 775 00:39:36,120 --> 00:39:38,080 Speaker 1: hedge funds. I just think it's really neat to have 776 00:39:38,120 --> 00:39:40,000 Speaker 1: a product that mom and pop can invest in that 777 00:39:40,120 --> 00:39:42,120 Speaker 1: is no incentive fees. It has one hundred and ten 778 00:39:42,160 --> 00:39:44,719 Speaker 1: bit management fee, just to say, because sometimes people get 779 00:39:44,760 --> 00:39:47,600 Speaker 1: confused and the fact that the funds themselves borrow money 780 00:39:47,640 --> 00:39:50,480 Speaker 1: at SOFUR and have their own fees that get impeded 781 00:39:50,560 --> 00:39:53,040 Speaker 1: into our expense ratio. People get confused and think I've 782 00:39:53,040 --> 00:39:55,680 Speaker 1: read it on Seeking Alpha that we charged five percent 783 00:39:55,760 --> 00:39:57,359 Speaker 1: or something, but no, our fee is one hundred and 784 00:39:57,360 --> 00:39:59,120 Speaker 1: ten BIPs. You don't even keep all of it because 785 00:39:59,120 --> 00:40:04,600 Speaker 1: we are are if a firm that's helped us structure it. 786 00:40:04,719 --> 00:40:07,400 Speaker 1: So I just think it's nice to have an ETF 787 00:40:07,440 --> 00:40:09,600 Speaker 1: out there where people can get kind of sabalite if 788 00:40:09,600 --> 00:40:13,880 Speaker 1: they want a lonely product. And so it holds mostly 789 00:40:14,680 --> 00:40:18,400 Speaker 1: US equities through closed end funds of venerable managers like 790 00:40:18,440 --> 00:40:20,960 Speaker 1: Blackrock and you know PIMCO. 791 00:40:21,239 --> 00:40:25,520 Speaker 3: So, as Boaz discussed, he runs a hedge fund SABA Capital. 792 00:40:25,560 --> 00:40:29,759 Speaker 3: It's about seven billion dollars, but he also runs an 793 00:40:29,760 --> 00:40:34,279 Speaker 3: ETF of closed end funds. The stock symbol is cef S. 794 00:40:34,719 --> 00:40:37,400 Speaker 3: It's a little over two hundred million dollars in assets. 795 00:40:37,880 --> 00:40:42,000 Speaker 3: You get to participate in the same strategy, only in 796 00:40:42,040 --> 00:40:47,960 Speaker 3: an ETF, not a hedge fund. Investors who are looking 797 00:40:48,160 --> 00:40:54,400 Speaker 3: for relatively steady gains with modest volatility. The activist approach 798 00:40:54,480 --> 00:40:59,000 Speaker 3: has proven successful in identifying closed end funds that are 799 00:40:59,080 --> 00:41:02,480 Speaker 3: trading at a discount. This is one way you could 800 00:41:02,480 --> 00:41:06,160 Speaker 3: get that exposure. I'm Barry red Halts. You've been listening 801 00:41:06,200 --> 00:41:08,279 Speaker 3: to Bloomberg's at the month