Why Saba Capital’s Credit & Hedge Strategies Are Lagging While Closed-End Fund Activism Gains Ground

Saba Capital’s flagship fund, focused on credit-market dislocations, is underperforming materially in 2025. Though broader markets have rebounded—equities and bonds enjoying gains—this strategy has declined ~6.5% year-to-date through late November, extending its streak of weak returns from 2023 (−16.9%) and only modest gains in 2024 (+3.4%) [1]. This suggests that Weinstein’s deeply structural view—that markets are rich with mispricing and at risk of disruption—has not aligned with prevailing conditions where volatility has lagged bearish expectations. The misalignment raises risks of capital loss and investor attrition if current trends persist.

The performance of Saba’s tail-hedge fund is even more concerning: down ~12.7% in 2025, following losses in each of the past two years [1]. Tail hedging is an insurance-like strategy, expensive and loss-bearing in calm markets; its consistent underperformance reveals how slowly (or not) Weinstein’s downside protection thesis has materialized. That said, its underperformance also highlights opportunity cost: investors in the tail-hedge fund have consistently paid for protection that hasn’t paid off—in contrast to the more volatile or “activated” returns expected from credit dislocations actually materializing.

To offset soft core strategy performance, Weinstein has leaned into activism in the closed-end investment trust (CET or CEF) space. Closed-end fund activism—buying when a fund trades at a discount to NAV, pushing for governance changes, board reforms or conversion to open-end structures—has delivered relatively smoother returns. For example, the Closed-End Opportunities 1 Fund (≈$240 million AUM) posted mid-single-digit gains in 2025, after strong returns in 2023 (17.7%) and 2024 (20.2%), vindicating this core part of Weinstein’s playbook. [1]

Strategic implications for investors and Weinstein himself:

• If market conditions stay calm (low volatility, stable credit spreads), Weinstein may underperform until a dislocation occurs; confidence in the timing of credit stress becomes a differentiator.
• Investor expectations and fund structure matter: Those paying for hedging (tail protection) may grow dissatisfied if protection remains costly and negative; this puts pressure on return attribution and fee justification.
• Saba’s activist strategy may gain appeal exactly because it delivers more tangible, less contingent returns; but the space is crowded and involves legal, regulatory and governance risks.
• Capacity constraints and fund inflows/outflows matter: if investors pull capital from the flagship or tail-hedge strategies, which are under pressure, Weinstein may face liquidity risk and deployment challenges.