Saba Suit Over Canadian Pension Funds Goes to Mediation

  • Boaz Weinstein's Saba Capital accused of manipulating funds
  • Saba called lawsuit over portfolio mark down ``meritless''

Boaz Weinstein’s Saba Capital Management LP and a Canadian pension fund will be forced to mediate a dispute over whether the $1.6 billion hedge fund manipulated its investments in a way that cheated Canadian retirees out of returns.

Canada’s C$112 billion ($86 billion) Public Sector Pension Investment Board sued Saba in New York state court last month, saying the firm “artificially manipulated” the value of its investment in bonds of McClatchy Co . The retirement plan, one of Saba’s biggest investors, said that when it asked in January to get all of its money back at the end of March, Saba marked down a significant portion of the fund’s portfolio. It then boosted the value of the assets in April, depriving the Canadian pension fund’s investors of their due, Saba said.

The case was referred to mandatory mediation under a program of the New York State Supreme Court’s Commercial Division that sends every fifth case that requests judicial intervention to a neutral third party to explore the possibility of settlement.

Saba has called the suit meritless. In an Oct. 11 statement, Weinstein said he takes the allegations very seriously, even though they relate to only a “tiny portion” of the pension fund’s investment. “The valuation process was transparent, it was appropriate, it was fully vetted by auditors, counsel and others, and it was entirely fair,” he said. “The suggestion that I manipulated the valuation of two bonds for my personal gain is utter nonsense.”

Jonathan Gasthalter, a spokesman for the firm at Sard Verbinnen & Co., couldn’t be immediately reached for comment.

Weinstein Losses

The suit come as Weinstein, the former co-chief of Deutsche Bank AG’s credit business, posted three straight years of losses before making 5.2 percent this year through August. Assets at New York-based Saba, which Weinstein started in 2009, have slumped more than two-thirds from a peak of $5.5 billion three years ago and some senior partners have left the firm.

The Montreal-based pension board, which oversees the retirement savings of Canadian federal public servants, said it was the Saba Offshore Feeder Fund’s largest investor, having invested $300 million in February 2012 and $200 million more the following year.

The board said it asked to redeem from Saba early this year after the fund’s net asset value had slumped to $1.5 billion by mid-2014. That decline appeared to be “unrelated to any market development that could or should have adversely affected the fund’s performance had the fund been properly managed,” according to the suit.

The case is Public Sector Pension Investment Board v. Saba Capital Management LP, 653216/2015, New York State Supreme Court, New York County (Manhattan).