The Public Sector Pension Investment Board (PSP Investments), a Canadian pension investment manager with $112 billion of assets under management, accused Boaz Weinstein’s Saba Capital in a lawsuit filed on Friday of ripping it off after the firm requested a redemption of its investment earlier this year. PSP Investments alleges that Saba Capital “engineered” a “one-time markdown” of one of its hedge funds’ portfolio, “in bad faith,” to skim value off the total amount asked by the firm in its request to pull out all of its investments in the hedge fund as of March 31, 2015. PSP Investments had $500 million in Weinstein’s Saba Offshore Feeder Fund, making it the fund’s largest investor. The lawsuit filed at the New York State Supreme Court follows an outflow of capital from Saba Capital after years of losses.
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According to the pension board, it invested $300 million in February 2012 for Class A shares. Another $200 million was invested in June 2013. This was in the middle of Saba Capital’s three-year losing streak in 2012, 2013 and 2014. This led to investors pulling out money from the hedge fund, which was what PSP Investments did earlier this year. When PSP Investments poured capital into Saba Capital, the latter had about $4 billion in assets under management. At its height in the summer of 2013, Saba Capital managed over $5 billion in assets. Now, the firm manages a considerably-smaller $1.6 billion in assets.
The lawsuit comes at a bad time for Weinstein as investors appear to have grown wary of his fund over the last three years. The performance of Saba Capital in the three years ending in 2014 appears parallel to his last days at Deutsche Bank, where his group tallied a $1.8-billion loss in 2008. He founded Saba Capital in 2009 and gained notoriety in 2012 for trading against J.P. Morgan Chase & Co.’s “London whale” which lost the bank more than $6 billion.