Saba Capital Management, the hedge fund firm founded by Boaz Weinstein, has seen its flagship hedge fund rack up losses of 7.7% so far this year after bearish bets backfired amid the recent stock market rally, according to a report by The Financial Times.

The report cites an investor letter seen by the FT as confirming the $1.3bn long-short equity fund's losses, which come after Weinstein late last year said that high inflation would lead to “doldrum” markets and that he was “very pessimistic”.

A second Saba Capital fund, which has assets of almost $1bn and is designed to protect against “periods of market stress and dislocation”, has also fallen heavily, racking up an 8.1 per cent loss.

The S&P 500 is up 18 per cent so far in 2023, while European and Japanese stocks have also seen strong gains.