At the peak of the global financial crisis in 2008, when he was only 35, Weinstein's proprietary trading group lost Deutsche Bank an estimated $1.8 billion. Less than a year later, in 2009, while many financial institutions and hedge funds collapsed or streamlined all over the world, he left the bank to form his own hedge fund firm: Saba Capital Management LP.
Wall Street's "brightest boy", who is considered the best credit trader in the world, is also a skilled poker and blackjack player. Back in 2005, he was invited by Warren Buffet to a poker tournament, where he won a Masaretti. Moreover, he was even chosen lately as one of Fortune Magazine's Under 40 Most Promising People, along side figures like Facebook's Marc Zuckerberg and Google's founders Sergey Brin and Larry Page.
Weinstein has given very few interviews. His public image depicts him as a risk taker, one who swims with the sharks in waters worth billions of dollars. But in his first most comprehensive media interview, Weinstein's character is gradually revealed to be more of a friendly dolphin than a flesh biting shark. He is patient and very polite. He takes his time answering each and every question. He elaborates when needed, which makes it even more impressive, taking into account the fact that the interview was conducted only two days before his wedding.
"She's amazing," he says, referring to his future wife, New York lawyer Tali Farhadian, who works at the United States Department of Justice. "Too bad you didn't get to meet her, she was here just a few minutes ago," he says
I am sitting comfortably at Weinstein's credit focused hedge fund offices. Saba Capital Management LP is conveniently located on the 58's floor of the Chrysler Tower, one of the most elegant and famous buildings in Manhattan. The Chrysler Building exhibits Art Deco architecture and is still considered by many architects to be one of the most beautiful buildings in New York City.
Weinstein is showing me his company's logo, his own design, with close resemblance to the eagles that decorate some of the building's corners. "Growing up in New York's Upper West Side, I always yearned to have my own office at the Chrysler building", he says.
Does this mean you are not Israeli? Many Israeli newspapers have proudly written this many times in the past
"My mom is Israeli. My dad is American. I was born here. I am an American, but I am an Israeli in my heart. I am very much connected to the Israeli community here in New York City. One of my closest friends here, who will also be speaking at my wedding ceremony, is Ephi Gildor. I am closely acquainted with Uzi Zucker who is also a neighbor; and Rivka Saker. While working in Deutsche Bank I was favorably inclined to hire many Israelis to various jobs, amongst them Elad Shraga. Out of approximately 200 people I used to manage there, I think around 7-8% were Israeli. That's not bad at all for a German bank."
Weinstein's Hebrew is good, but he prefers to speak in English. "My Hebrew was even better when I was younger. I studied at the Jewish School Ramaz. My family was not religious, but it was of utmost importance to my parents to give me the basics of Jewish heritage," he says, though his Hebrew is mingled with English. "Now I am a little embarrassed when I speak Hebrew. I haven't really spoken it since I was 12 – only when I visited Israel."
Weinstein is reminiscing about his Israeli past, mainly of the summer vacations he spent at his grandparents' (Aaron and Sabina Blachovitz) house in Ramat Gan, with relatives in Kibbutz Negba, and in Café Kassit in Tel Aviv. ”Hezkel Ish Kassit was my grand uncle. He and my Father were very close, and we would always go to Kassit when we were in Israel. I was very young, so I don't remember exactly who used to sit there."
Boaz' father, Stanford Weinstein, is the retired owner of an insurance brokerage firm bearing his name, in Brooklyn. His mother, Giselle Weinstein, worked briefly for the Foreign Office in Jerusalem, and also worked as a translator for the Haaretz daily in Israel, on a freelance basis. "My parents met at a charity event hosted in honor of Mrs. Meir in the 1960s."
Weinstein's older sister, Ilana, is a prominent head hunter in the hedge fund arena.
Since childhood, Weinstein was attracted to Mathematics and numbers. As a young boy he regularly followed sports statistics and was a viewer of the weekly Friday TV show Wall Street with Louis Rukeyser. It was his mother who introduced him to the Capital markets. It was a hobby of hers.
At the age of five his parents enrolled him and his sister at a chess workshop. "She was first in the class. I was third. But most of the kids were older, around seven or eight years old."
By the time Boaz was sixteen he became a renowned chess master in the United States and was ranked third. "It was at that time that many Russian immigrants came to the United States. They were better trained than me. For me, Chess was always a hobby."
Lately, at a charity event, Weinstein got the opportunity to play chess with Garry Kasparov , the Russian chess grandmaster. "It was thrilling, he is a hero, a genius, it was amazing," recalls Weinstein, who first met Kasparov five months earlier. "He was sitting in this room- we were eating lunch together and got to know each other."
Later on, a New York Times news article declared Weinstein the winner of the match. "That's not accurate," he says. "It was a dual game, I played with a world champion against Kasparov and another guy. Since it is forbidden to talk to your mate throughout the game, the champion could not tell me what to do. I definitely don't play like he does."
Is there a link between your excellent gaming abilities and professional success?
"I don't really like those analogies. But I can say that people who excel in games like Poker or Chess have good strategic thinking which helps them in finances as well."
Weinstein started his career in the capital markets arena at the age of 15. He accidentally saw an ad on Stuyvesant's High School bulletin board. It was a Merrill Lynch ad, and they were recruiting employees.
"It's funny, because back then I already had a very deep voice. I sounded like an adult. I just did not sound like a 15 year old boy. They asked me whether I can make some phone calls. I agreed, they accepted me and gave me a job. I used to work there after school, and during the summer vacations it was a full time job. I only did what I had to do – scheduling meetings, stuff like that. But I learned a lot, I got to listen to people talking in meetings, read financial reports, and eventually started to invest money."
You were just a teenager. What about some fun?
"I will argue I had a lot of fun. Wall Street was always my passion, it still is. I had a very happy childhood. I had a lot of friends from chess, from high school. They're my best friends till today."
After high school he attended the University of Michigan. Weinstein admits that he wanted to study other things other than finance. "I already knew I will be working in Wall Street and I thought I'd already had enough experience. I had the urge to study something broader. I took a few courses in Economics, but majored in Philosophy. I loved reading the writings of Aristotle, David Hume, René Descartes. I was especially fond of Ethics and Logic".
While studying Descartes and Hume with his university colleagues in his first year of college, his sister, who worked at Goldman Sachs helped arrange his first job interview with the firm.
"At the end of the interview they said 'thank you, but we have nothing for you at the moment'. I thanked them and on my way out stopped at the restroom. While standing there, washing my hands, I saw David Delucia, one of the partners at Goldman Sachs, standing next to me. I met him earlier across the chess board. He asked me what I was doing there, and I told him. Consequently he arranged for me around 10 new job interviews."
Only after a long session of job interviews and negative responses mainly due to his young age, Weinstein finally managed to be accepted into Goldman Sachs. "I worked there for three summers. It was amazing, because I was in my late teens and I worked with colleagues who were in their mid- late 20s studying for their MBA degrees."
After Goldman Sachs, he returned to Merrill Lynch, and from there moved to a firm called DLJ that was later on acquired by Credit Suisse. In 1998, the people he was working with in Merrill Lynch decided collectively to move to Deutsche bank. Weinstein decided to join them.
"It attracted me. The credit market was just beginning to change, a new business was born. Imagine that in the past 500 years the credit market has hardly ever changed, it was always the same – loans and bonds – that's pretty much all. In 1998 the credit derivatives market was born. It was a level playing field. For everyone it was an on –the-job-training.
"What was so unique in Deutsche Bank was the fact that they just entered the United States, so there was an entrepreneurial atmosphere there, there was less bureaucracy. The people who succeeded in Deutsche Bank got promoted very quickly. So at the age of 25 I was already managing the team. It was a very fast track, and I know I was lucky. It's true that I was very young, but keep in mind I already had 10 years experience in Wall Street in my track record."
Less than two years later, at the age of 27, he rose to prominence and was quickly promoted to be the youngest ever managing director at Deutsche bank, as he was responsible for managing the global credit division of the bank, supervising 200 employees who managed around $10 billion.
And then, out of nowhere, came the global crisis. "Looking back, those were very unusual times. The first eight months of that year were relatively good for us. But suddenly, Lehman Brothers collapsed, and here I am, facing this unbelievable event."
Weinstein admits that all the events that followed were condensed into the four months following this collapse. "It was so dramatic. I represented Deutsche Bank at the Federal Reserve the weekend that Lehman Brothers went bankrupt. We stayed up all night. It was surreal. I learned a lot. I was very disappointed that we lost money after all."
Throughout those turbulent times, Weinstein did not panic. Trying to understand how much money his division lost, depends on where you try to find the answer to this question. According to the Wall Street Journal, Weinstein's proprietary trading group lost about $1.8 billion in 2008, or 18% of its capital, while the average loss of the hedge fund industry at that year was 21%.
According to other sources it was $1.6 billion, but as per the New York Times it was a little less than $1 billion. "Newspapers always write about losses at the worst point of time. They are looking for sensations," says Ephi Gildor, Weinstein's friend, a partner of the New York-based hedge fund Axium.
"I think the losses were much lower than what was depicted in the media, maybe a third of what was published. Taking into account the total amount of assets under management, it's not a big percentage," he says.
"It's true we lost money in 2008," says Weinstein. "But everyone did. People made a big deal out of it, not because we lost so much more than others, but because we were bigger than the rest."
"I would say that I was depicted as a symbol for traders in banks that trade in ways similar to those in hedge funds. Whether banks need to manage hedge funds is a different issue – but it's clear that we did the best we could with the capital risk that was given to us."
Weinstein's turning into a symbol peaked this year, with the publication of Scott Peterson's book "The Quants", in which Peterson claims, along with other mathematician investors, that Weinstein had an important role in the collapse of Wall Street.
“This was meant to be the thesis of his book, but after the cover page, he doesn't make any effort to prove his point," says Weinstein. “Journalists and Wall Street managers alike have been very clear that the mess with the Subprime mortgages had little to do with hedge funds investing in banks or at the hedge funds themselves. The best part about the book was that I got to be grouped with legendary investors like Jim Simons, Cliff Assess, and Ken Griffin”.
Last January, Weinstein left Deutsche Bank, and hired 15 people who worked with him in Deutsche Bank, in the unit know as Saba. He says that he made up his mind to leave Deutsche long before he actually left the bank.
"Saba was actually born in 2006. It was the name of the Proprietary credit trading unit I started in Deutsche bank. Back then, I talked to the head of Deutsche Bank’s investment banking division, and told him that I want to create a hedge fund. We had an agreement that he would let me name the group something unaffiliated with Deutsche, so that one day we will be able to take this unit out of the bank and create our own independent fund.
"Our agreement was that if I gave 12 months advance notice, in return, he would let me take the employees with me. In January 2008 I notified him that I wanted to leave, and in January 2009 I actually left the bank. We are still good friends and Deutsche Bank is one of the two firms I use as the Fund’s prime broker."
Why did they agree to that deal in Deutsche?
"It is indeed exceptional, but I must admit that the working relationships in Deutsche were extraordinarily special. They wanted to keep me, and they knew that all the 28 people that worked in the unit with me were the ones that I recruited to Deutsche."
Weinstein and his team formed Saba in 2009, a time in which most of the hedge fund industry was either crushing to pieces or down sizing in order to survive. For Weinstein, the timing could not have been better. "We had a lot of wonderful investments created out of the dislocation of 2008. I had plenty of skilled workers that I took on to work with me, but the hardest part was to find investors. Finally, we even managed to do that."
The Fund started operating in April 2009 with one single investor, and by August of that year had already raised about $160 million. Until recently, it has already raised about $1.8 billion. The Fund is up 10% this year and since inception, its monthly returns are positive, reaching almost 18%.
"After being a part of a huge organization with tens of thousands of workers, it's a wonderful feeling to create something which is totally your own," he says.
Why did you decide to invest in Saba?
"I've known Boaz for so many years. We used to count Black Jack cards in Vegas together. Have you seen the movie 21? It's about him. We used to make a lot of money in the Casinos, and I just know it. He is so smart".
For the sake of simplicity, Weinstein's area of expertise is credit focused. He buys and sells bonds and hedges them. The three main strategies of investment in Saba are Credit Long/short, Capital structure arbitrage and Credit relative value. So far, the fund has avoided focusing on market trends. "I generally advocate a market neutral approach to investing, especially now, given the uncertain the direction of the economy," says Weinstein. "Our portfolio can profit either way- from a market going down or up ".
What's your investment methodology?
"Generally speaking, there are two major investment methodologies. The first, those who follow the market trend, and are called directional investors. They are very much influenced from the market's daily performance. The others, including myself, are called Relative value investors. We're more neutral, we don't care if the markets are up or down.
"What we do is take two companies with a common denominator, let's say Coca Cola and Pepsi. We long the first, and short the second. We focus on the delta, knowing which company is under or over valued, and profit from the difference. We actually rate the companies in terms of their valuations, as we try to find those that are under or over valued, in our opinion.
"But it's not enough to just know which company isn't properly valued. You need to know why. If the stock is cheap you must understand why, and how come other investors don't know that as well ? There are no free lunches; it would be too arrogant for me to assume the stock is just there because it's there."
Weinstein is also interested in the psychology of investments. "I read a lot about Behavioral economics, and I utilize it when I try to construct my puzzle. For me it means that the system is comprised of many different parts- fundamental analysis, behavioral aspects and pure calculations. Not every transaction necessarily combines all three, but they're there, as background, and cannot be ignored."
What's your lesson from 2008?
"It does not matter how good an investment is- if many people are into it simultaneously- it creates a problem. Just imagine a scenario in which everyone has the same merchandise and they're all trying to sell it at once - you have the risk of a domino effect. That's why an investor should make transactions in investments that are less crowded. I'd also like to point out that every investor, be it the best global investors, sometimes has a bad year."
Why did you call the fund Saba?
"Most of the investors name their funds after the streets they live in, or even after some Roman Gods. I decided to choose a name which will be meaningful to me, and named it after my grandfather, who was our patriarch.
"Saba was a true survivor. He saved the lives of more than 20 people by building a double wall to hide them during the Gestapo raids in the Warsaw Ghetto. He saved the life of his baby daughter by sneaking her out of the ghetto at dawn when parents were ordered by the Nazis to bring over their children – those children were sent to their death. Saba was sent to a Labor camp that was building submarines near Gdansk at the Baltic Sea. He was able to escape just before all those slave laborers were drowned by the Nazis.
"Grandma looked Arian and survived by getting false Polish documents. My mother who was sent to a Christian family living on the farm, would see her occasionally – not knowing it was her own mother. After the war, my grandfather was able to reunite with his wife and child. A rare miracle for a Jewish family during the Holocaust.
"The memory of this story touched me, and convinced me to name my fund after my grandfather, a meaningful figure to me."
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