The Alpha Masters: Unlocking the Genius of the World's Top Hedge Funds

Chapter 9

The Derivatives Pioneer

Boaz Weinstein

Saba Capital Management

Our fund is looking for asymmetric investments, ones where we can make a lot more than we can lose.

—Boaz Weinstein, May 2011 interview

“Nothing in life is so exhilarating as to be shot at without result.” So said Winston Churchill, speaking of his experiences in the Battle of Omdurman, in Sudan, where as a 24-year-old lieutenant in the 21st Lancers, he participated in what came to be recognized as the last meaningful charge of the British cavalry.

Boaz Weinstein might be able to relate to this sentiment. Though he wasn’t exactly shot at during the financial crisis of 2008, he was at the vortex of the conflict. Then 35 years old and the youngest managing director in the history of Deutsche Bank, Weinstein helped manage the bank’s affairs at that perilous time, when banks were suffering significant losses. Weinstein was also running a proprietary trading group within Deutsche called Saba, which itself was hit with losses of $1.8 billion, or 18 percent, on capital of $10 billion, a sudden turn of events after 10 profitable years. Moreover, Weinstein had long championed credit default swaps (CDSs), the still poorly understood instruments that were widely blamed for accelerating the collapse.

Yet after all the shooting on the financial battlefield subsided, Weinstein emerged none the worse for wear. In the first eight weeks of 2009, Saba recovered a third of what it had lost. In February 2009, with the aftershocks ...