26 March 2025

At the Money Special: Activist Investing for NAV

1Frameworks

12Insights

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Frameworks in this episode

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Activist NAV Discount Conversion

Buy verifiable discounts, build voting power, and force a path back to NAV.

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Insights & moments

The myth-busts, hot takes, explainers, and tools worth keeping.

Myth Buster· 1

Myth Buster23:46

That 20% Closed-End-Fund Yield May Be Your Own Capital Coming Back

A fund earning enough to support a 6% distribution cannot magically generate 20% merely because management changes the payout. The additional distribution may be a return of shareholders' own principal, which can attract yield-chasers temporarily while shrinking the fund and setting up a sharp loss if the payout is cut.

Distribution yield is not the same as underlying investment return.
Return-of-capital payouts can make weak economics look attractive.
Yield sorting on retail platforms can push a discounted fund toward NAV or a premium.
A later dividend cut can produce a 15% to 20% one-day loss.

“What's that fourteen? That fourteen is your own dollar coming back to you.”
Boaz Weinstein · 24:34

“there's no alchemy in finance.”
Boaz Weinstein · 24:59

#yield#return of capital#dividends#closed-end funds

Explainer· 5

Explainer07:49

How Institutional Capital Turned Saba Into a Stronger Activist

State-pension allocations allowed Saba to expand positions much faster and approach ownership levels that boards could not ignore. A 29% holding creates a materially different threat than a 15% position because management may face liquidation, replacement, or a severe loss of fee-generating assets.

Institutional allocations can exceed $100 million each.
Four state-pension investments accelerated Saba's growth.
Larger positions reduce dependence on persuading many outside shareholders.
The credible threat of liquidation strengthens negotiations.

“It allows us to get bigger, faster, stronger”
Boaz Weinstein · 08:14

“If we have a twenty nine percent position in the fund. Management is very worried that we'll be able to cause the fund to liquidate”
Boaz Weinstein · 08:21

#institutional capital#pensions#activism#aum

Explainer12:50

Why UK Closed-End-Fund Discounts Widened So Sharply

The UK's LDI crisis, inflation shock, and a later capital-gains-tax increase triggered waves of selling. Because closed-end funds lack automatic buyers at modest discounts, selling pressure could push them rapidly from near NAV to double-digit discounts.

The 2021 inflation and LDI crisis generated forced selling.
Investors also sold before a 2024 capital-gains-tax increase.
Natural buyers are scarce when discounts first emerge.
Even a multibillion-dollar specialist cannot support the entire market.

“The problem with these products is they don't have natural buyers at low discounts.”
Boaz Weinstein · 13:34

“So they can fall like a knife from minus one to minus thirteen”
Boaz Weinstein · 13:47

#uk markets#ldi crisis#taxes#liquidity

Explainer17:49

Why Billions in Discounts Have Not Attracted More Activists

Weinstein says the apparent opportunity persists because activism is expensive, adversarial, and strategically awkward. Generalist activists may depend on major asset managers for support in unrelated campaigns, making them reluctant to challenge those managers' own funds.

Activists must fund litigation and prolonged governance battles.
A legal precedent in one case may affect dozens of later campaigns.
Generalist activists risk alienating asset managers whose votes they need elsewhere.
A discount is not true arbitrage without someone willing and able to force change.

“Well, so activism is hard. You make enemies.”
Boaz Weinstein · 17:49

“But it's not really a puzzle if you don't have a mechanism to narrow it”
Boaz Weinstein · 20:05

#activism#conflicts#legal costs#market inefficiency

Explainer28:52

Why Market Selloffs Can Make Almost Every Closed-End Fund Interesting

A broad decline can widen discounts across both expensive and already-discounted funds because there is no automatic buyer supporting their prices. Weinstein points to 2020, when the opportunity set expanded abruptly as discounts moved toward 20%.

Already-discounted funds can become even cheaper during a selloff.
Funds near NAV can fall to deep discounts just as quickly.
Specialist buyers tend to arrive only after discounts become extreme.
Market stress replenishes opportunities that prior activism removed.

“when twenty twenty happened, all of a sudden, almost every fund was interesting.”
Boaz Weinstein · 29:01

“there isn't a safety net where you would have people to catch it.”
Boaz Weinstein · 29:19

#selloffs#discounts#liquidity#opportunity set

Explainer38:20

What Investors Actually Get Through Saba's CEFS ETF

CEFS packages Saba's closed-end-fund approach into a retail-accessible ETF without an incentive fee. Weinstein cautions that its risk changes with its holdings: it once held mostly fixed income but currently has predominantly equity exposure through funds run by established managers.

The portfolio's bond-versus-equity exposure changes over time.
The ETF grew organically without a distribution plan.
Its shareholder base appears dispersed among value-oriented investors.
The management fee is 110 basis points, while acquired-fund expenses also appear in the reported expense ratio.

“now we happen to own mostly equities, so it's not bond like risk, it's bond and equity like risk.”
Boaz Weinstein · 38:23

“our fee is one hundred and ten BIPs.”
Boaz Weinstein · 39:53

#cefs#etf#fees#portfolio exposure

Story· 4

Story15:10

Saba Lost the Vote—but Left UK Fund Boards in a Precarious Position

Saba proposed replacing seven UK fund boards and lost after an aggressive phone-voting campaign by incumbents. Weinstein argues the result still exposed a narrow voting gap: additional purchases by independent arbitrageurs could shift future elections without coordinating with Saba.

Saba used UK rights allowing a holder above 5% to call a meeting.
The proposal sought to replace entire boards.
Incumbents used phone solicitation to gather opposing votes.
The published vote revealed how little incremental ownership could reverse the outcome.

“my proposal was replace all of you and replace them with us.”
Boaz Weinstein · 15:25

“I'm not stuck. You're stuck because now everyone knows the score is, let's say forty two to thirty.”
Boaz Weinstein · 16:06

#uk governance#proxy voting#shareholders#activism

Story18:02

The Court Fight Over Saba's Right to Vote Its Full Position

A fund manager limited Saba to voting 9.99% despite its roughly 20% ownership. Saba sued, won on summary judgment, and then prevailed when the appellate court unanimously rejected the manager's appeal.

Federal investment-company law says every share receives a vote.
State-law provisions were used to limit Saba's voting influence.
The trial court ruled without requiring a full trial.
The appellate result reinforced the precedent.

“Every share gets to vote.”
Boaz Weinstein · 18:12

“the appellate court rejected unanimously Nuvine's appeal.”
Boaz Weinstein · 18:49

#voting rights#litigation#fund governance#shareholders

Story33:11

How Saba Swapped Credit Risk for T-Bill-Backed SPAC Exposure

After taking over a Voya closed-end fund, Saba sold high-yield loans and purchased discounted SPACs offering a similar spread over a roughly one-year horizon. The switch replaced single-B and double-B credit exposure with vehicles backed by Treasury bills held at major banks before the 2022 bear market.

The original mandate consisted entirely of high-yield loans.
Both assets offered roughly comparable spreads at the time.
The SPAC collateral carried much higher credit quality.
The repositioned fund ranked first among 257 peers during 2022.

“you would basically still earn your three fifty but you would have gone from single double B loans to triple at bills in a box”
Boaz Weinstein · 33:43

“we were the number one performer. So we got very lucky.”
Boaz Weinstein · 33:54

#spacs#credit risk#portfolio management#2022 bear market

Story36:18

How the Crises of 1998–2002 Shaped Weinstein's Investing Style

Weinstein describes beginning his career amid Russia's default, Enron, 9/11, and WorldCom. That sequence made persistent directional optimism feel unnatural and pushed him toward hedged, relative-value positions where both sides of a trade could be established.

Early market experiences can shape an investor's enduring risk preferences.
Repeated crises discouraged reliance on long-only exposure.
Relative-value trades provide a more controlled expression of conviction.
Finding a niche that matches the investor's temperament matters.

“my vintage was not to be directionally long, and it was not even in my makeup.”
Boaz Weinstein · 36:48

“I also think you have to find like your niche and where you're comfortable”
Boaz Weinstein · 37:04

#investing style#arbitrage#market history#risk

Q&A· 1

Q&A30:44

Do Investors Still Need Closed-End Funds in an ETF World?

Weinstein accepts that some closed-end funds holding liquid assets may no longer be necessary. He nevertheless argues that genuinely illiquid strategies need a structure without daily redemptions, leaving the wrapper with a legitimate but narrower role.

Low-cost ETFs challenge actively managed closed-end funds.
Some liquid portfolios could use a more investor-friendly wrapper.
Illiquid assets may be unsuitable for an ETF.
Better discount-management policies could make future issuance viable.

“Some of them are not needed, Some of them that have truly liquid assets are needed because an ETF would be the wrong rapper for…”
Boaz Weinstein · 31:02

“So I do think there is a home for closed end funds”
Boaz Weinstein · 31:06

#etfs#fund structure#illiquid assets#asset management

Takeaway· 1

Takeaway02:18

Why Weinstein Avoids Building a Strategy Around Market Forecasts

Weinstein argues that even celebrated forecasters eventually demonstrate how difficult sustained market prediction is. Surprises such as COVID or 9/11 may explain individual misses, but they do not solve the underlying forecasting problem.

Past success can cause investors to overestimate forecasting skill.
Unexpected events are recurring features of markets, not isolated excuses.
Beta has paid during the bull market but cannot be assumed to work indefinitely.

“But predicting the markets is really tough.”
Boaz Weinstein · 02:47

“We've been in a bull market, so beta has paid off, but it's not always going to”
Boaz Weinstein · 02:53

#forecasting#market risk#beta#investing