Saba, Pine River Buy Discounted Closed-End Debt Funds

Mar 3 2014 | 11:41am ET

A pair of prominent hedge funds are finding the discounts at closed-end mutual funds irresistible.

Saba Capital Management and Pine River Capital Management have invested more than $1 billion in closed-end debt funds, Bloomberg News reports. Saba has been the much more active of the two, investing $847.3 million since last year, according to regulatory filings.

Among the funds favored by the two firms are those managed by giants BlackRock and Pacific Investment Management Co.

Traditional closed-end debt fund investors have been fleeing the vehicles after the Federal Reserve began to taper its stimulus programs last year. Those outflows have led to the biggest discount to net-asset values in five years, according to Thomas J. Herzfeld Advisors; Pine River's purchases averaged a 9.1% discount.

It is unclear what Saba and Pine River plan for the funds. While they could be betting on a bounce-back from the depths, activist hedge funds in the past have sought to remove closed-end funds' management or to have the funds liquidated, to capitalize on the NAV discount.


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