To Boaz Weinstein, Betting Against JPMorgan’s Trade Was ‘Easy’

JPMorgan Chase has been in an uncomfortable spotlight over the last week, after the release of a scathing Senate report related to its multibillion-dollar trading loss last year.

On Thursday, the hedge fund manager on the other side of that bet took an opportunity to reflect.

“That was a fairly easy and obvious trade to do,” said Boaz Weinstein, the founder of Saba Capital Management, who was among a group of investors betting against JPMorgan’s trader known as the London Whale. While the trade caused losses of at least $6 billion for JPMorgan, it was enormously profitable for Mr. Weinstein.

Speaking to an audience of industry professionals at the Absolute Return Symposium in Manhattan on Thursday, Mr. Weinstein recalled how the investment opportunity arose when he noticed anomalies in a particular credit index. He discussed that idea at an industry conference in February last year, before the extent of JPMorgan’s losses had become public.

At the time, he said, he didn’t realize it was JPMorgan on the other side of the transaction. But by May, the trade was making headlines, as JPMorgan announced losses that seemed startling for a bank that had such a strong record of managing risk.

“It’s less about the money that was made â€" although it was substantial â€" and more about the historical significance of one entity being on the other side of this trade,” Mr. Weinstein said.

JPMorgan and its chief executive, Jamie Dimon, came under intense criticism in the report released last week by the Senate Permanent Subcommittee on Investigations, which also subjected current and former executives to a public grilling.

Beyond the financial losses, the trade caused significant reputational damage for JPMorgan, which said last year that the loss-making position was intended as a hedge against risk.

“I think it’s pretty clear from the Senate paper that it was not a hedge, it was a bet,” Mr. Weinstein said.

The hedge fund manager, an expert in credit, spoke about the trade during a question-and-answer session at the Absolute Return event, after a discussion about Japanese corporate bonds.

To Mr. Weinstein, the trade fit with his strategy of identifying a technical mispricing in credit markets. But it had larger ramifications for the financial industry.

“That whole story,” Mr. Weinstein said, “was worth the attention that the media gave it.”