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Saba Capital Management is preparing to raise around USD 1 billion through a new investment vehicle aimed at acquiring stressed private credit funds. The move comes as redemption pressures rise across business development corporations and interval funds, limiting investor liquidity. The firm’s earlier discounted buyout offers for funds linked to Blue Owl and Starwood saw limited participation, but still supported its broader strategy. Increasing regulatory scrutiny and weaker return expectations in private credit markets have created opportunities for investors willing to buy distressed assets at discounts.
Saba Capital Management, led by Boaz Weinstein, is planning to raise fresh capital for a new investment vehicle focused on acquiring stressed private credit funds. The firm is targeting approximately USD 1 billion and expects to secure the capital over the coming weeks, according to people familiar with the development. Advertisement
The proposed fund is designed to purchase assets from private credit vehicles that are facing valuation pressure, largely due to rising redemption requests from investors seeking liquidity. These include business development corporations (BDCs) and interval funds, which typically offer limited exit options compared to traditional open-ended funds.
The new strategy marks a notable expansion for Saba Capital Management into both public and private credit-linked structures. These products, while similar to closed-end funds, have historically restricted investor withdrawals, making them vulnerable during periods of market stress.
Private credit markets have recently come under closer scrutiny from regulators and policymakers following high-profile losses and declining return expectations. Market participants have raised concerns about liquidity mismatches and the risk profile of underlying borrowers, particularly as many BDCs lend to smaller and mid-sized companies with limited access to traditional banking channels.
Weinstein has indicated in past interactions that his strategy involves capitalising on negative sentiment in the market, suggesting that the firm is positioning itself to benefit from discounted valuations in distressed segments.
The move follows Saba’s recent attempt, alongside Cox Capital Partners, to acquire stakes in funds managed by Blue Owl Capital and Starwood Real Estate Income Trust at significant discounts. These tender offers, which concluded in the past week, received a relatively muted response from investors.
The firms were able to acquire approximately USD 10 million in aggregate face value across 190 trades, with the majority of participation coming from the Starwood REIT. In contrast, investor participation in the Blue Owl-linked fund remained limited, with less than 1 percent of shares tendered.
Blue Owl had advised its investors against selling into the discounted offer, which may have contributed to the lower response levels. Representatives from both firms have not publicly commented on the outcome.
Despite the modest uptake, sources indicated that Saba views the exercise as a partial validation of its broader investment thesis. Demand from wealth advisors, particularly those managing portfolios with limited-liquidity exposure, has highlighted the need for exit options in such structures.
Earlier, Saba and its partner had offered to purchase up to 6.9 percent of shares in Blue Owl Corp II at a discount of around 35 percent to net asset value, reflecting the firm’s willingness to take positions in stressed assets.
Weinstein, known for his earlier successful trade against a JPMorgan Chase trader during the London Whale episode, has consistently maintained that stress in private credit markets is creating opportunities for investors with flexible capital.
Source Reuters
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