Episode summary
Boaz Weinstein | Money Stuff: The Podcast
Money Stuff The Podcast
· · 49 min · Hosts: Matt Levine, Katie Greifeld · Guests: Boaz Weinstein
Summary
Boaz Weinstein argues that semi-liquid private credit products and closed-end funds have a structural liquidity problem: they promise investors an exit that may be available only in calm markets, not when redemptions surge. He frames Saba Capital’s tenders for OBDC II and Starwood SREIT as both a bid for discounted assets and a liquidity trade, saying retail investors and even some institutions may not have understood that the liquidity of the underlying assets does not match the liquidity of the fund shares.
Weinstein says the discounts are more than just optics because leverage, fees, and potentially stale NAV marks can make a 35% discount to NAV less attractive than it looks. He ties the setup to reflexivity: falling NAVs can drive outflows, which force selling, which pushes NAVs lower again. He also argues that managers’ incentives are misaligned because permanent capital, fees on NAV, and brand preservation can make them resist buybacks or tenders even when their own funds trade at large discounts.
The broader claim is that private credit is entering a stress test. Weinstein expects more redemptions, more mark-downs, and more scrutiny of disclosures, brokers, and managers. He sees the current dislocation as a potential long-term opportunity, but says Saba may be early and could even lose money on the first trade.
Key takeaways
- Weinstein says Saba’s tenders for OBDC II and SREIT are meant to capture liquidity needs and discounted NAVs, not just “troll” the industry.
- He argues that private credit funds overpromise liquidity because a 5% quarterly tender can fail badly when investors rush for the exit.
- Weinstein says fees, leverage, and stale marks make a quoted 35% discount look larger or smaller depending on the portfolio structure.
- He thinks public BDC discounts around 30% make it hard to justify private BDCs trading much closer to NAV.
- Weinstein sees reflexivity, lower SOFR distributions, and rising defaults as reasons the private credit selloff could deepen.
Notable quotes
“the liquidity of the underlying does not at all match the liquidity of their investment”
“I really think this could be a systemic nightmare”
“the bug becomes the feature”
“volatility laundering, which is like just about the best two-word quote for to talk about what's pro wrong with Wall Street ever”
How the episode opens
Bloomberg Audio Studios podcasts radio news. Hello and welcome to the Money Stuff Podcast. I'm Matt Lavine.
I'm here with Katie Grefield and our guest is Baz Weinstein of Saba Capital Management. I feel like we've thought since the beginning of this podcast about having you on to talk about closed end fund activism, but man, closed down fund activism has in a new form gotten really hot. I want to talk about like what your trade is.
you're out with a tender to buy what five 10% of OBDC2 5% of OBDC2 the uh the blue owl private BDC at a 35ish% discount to marked NAV. So like what's the trade here? Like are you like going in the book and like doing detailed credit work and being like we think this stuff is worth 75 cents on the dollar so we'll pay 65.
Are you hedging the credit? Are you trolling? Are you What's the sort of basic trade here?
Why, Matt, do you assume it's not all the above? — It's just a lot. — I'm going to start I'm going to start with trolling. The reason to assume it's trolling and not all of the above is because I think I think you mentioned before we started people's first natural question is do you think you'll get any?
Okay. So, I've read some people uh suggest oh this is some sort of uh PR blitz like like I to get myself in in the story. We actually had the tenders. — It worked. — Well, we actually had the tenders ready before the blue owl story uh became a huge
You said the tenders like for OBDC 2 or like do you have 15 of these ready to go? — We have a few ready to go.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- permanent capital
- reflexivity
- private credit navs
- public vs private bdc discounts
- fund liquidity
Companies and tickers mentioned
- Saba Capital Management
- OBDC II
- SREIT
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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