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A legendary fund manager is piling into a market he says Wall Street is ignoring

Famed credit trader and fund manager Boaz Weinstein, who won his bet against the London Whale, is buying closed-end funds that he says Wall Street is ignoring.

Saba Capital founder Boaz Weinstein thinks there's money to be made in closed-end funds, which are ignored by Wall Street.

Psst... there's a fortune to be made buying closed-end funds (CEFs). Just don't tell Wall Street.

That was the message delivered in a recent interview by famed credit trader Boaz Weinstein, whose $1.7 billion firm Saba Capital is best known for

CEFs, which raise money through initial public offerings and then trade on public exchanges, just like stocks, total $240 billion in market value right now. But unlike their open-ended counterparts, managers are unable to create new shares to meet investor demand.

To Weinstein, the appeal of CEFs at the moment stems largely from how attractively-priced they are. Following what he describes as some "peculiar dynamics" around the taper tantrum in 2013, investors turned into large sellers, which caused CEFs to trade at a discount over time.

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"Although CEF discounts have narrowed in the past year, it’s possible to buy a few dozen of them at an average 10% discount without sacrificing quality," the Saba founder and chief investment officer said in an interview with the Octavian Report, a subscription publication featuring conversations with investment heavyweights. "You go into it hoping the discount will narrow on its own, but one of the nicest points about this investment is that while you wait, you earn an above average yield, given the discounted price."

While Weinstein points out that most institutional fixed-income investors haven't ever owned a CEF, he does highlight some notable fellow bulls. For one, Bill Gross still owns over $140 million of CEFs from Pimco, the giant bond fund he used to run. Weinstein also highlights Jeff Gundlach, who he says has issued CEFs and recommends buying them — but only at a discount, of course.

Weinstein acknowledges that another appealing aspect is how the space feels largely free of Wall Street meddling and influence.

"It’s a rare corner of the market where retail investors can get an edge over institutions," he said in the Octavian interview. "Most institutions don’t realize that it is a large enough market to matter to them."

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