Person in the news

June 20, 2014 2:18 pm

Paul Singer, the hedge fund holdout

The rightwing fund manager plays hardball on both distressed debt and gay marriage
Paul Singer - Person in the News©Cummings

When a vote on the legalisation of gay marriage in New York state was on the verge of defeat three years ago, salvation came from an unexpected source: one of America’s most formidably rightwing hedge fund managers.

Paul Singer, founder of Elliot Management, corralled a small group of like-minded billionaires who promised nervous Republican senators a firewall of campaign donations to withstand attempts by the party’s social conservatives to unseat them. The plan helped them to raise more than $1m in a matter of days – a big sum for sleepy state senate races – and it swung the right number of votes to secure the Empire State for marriage equality.

Opponents cried foul but it was another step towards the prize of full national recognition for gay unions, Mr Singer’s goal since his son came out in 1998. In politics as in investing, he is a player of the long game, and his tactics – meticulously planned, aggressively executed – are often controversial.

This week – 13 years after Elliott Management began accumulating Argentine government debt at knockdown prices on the brink of that country’s default – the US Supreme Court decided that it and other hedge funds must be paid in full on $1.5bn in outstanding bonds. Elliott led a small group of investors who held out against the terms of two sovereign debt restructurings, in which other creditors accepted less than the face value of their bonds.

“Whether it is gay marriage or Argentina or affecting the political landscape, Paul is intense and tenacious in seeing things through,” says Daniel Loeb, founder of the hedge fund Third Point and a fellow gay rights donor. “He is intensely focused and result-oriented yet extremely principled.”

In a defiant response to the court ruling, Argentina’s President Cristina Fernández said that Buenos Aires would not give in to “extortion by speculators” and “vultures”. The rising value of the holdouts’ investments, once thought worthless, would give them a return even organised crime could not match, the president said.

Whether it is gay marriage or Argentina or affecting the political landscape, Paul is intense and tenacious in seeing things through

The legal assault on Argentina follows similarly aggressive holdout tactics by Mr Singer against the governments of Peru and Congo-Brazzaville; tactics that Anne Krueger, a former first deputy managing director of the International Monetary Fund, says make it much harder to help indebted nations when their economies flounder.

Mr Singer chafes at the term “vulture fund”. Not paying creditors often speaks to a wider government corruption likely to be harming citizens even more than bondholders, he says. “He is focused on the rule of law,” says a person who has worked with him. “He believes in it wholeheartedly.”

Paul Elliott Singer was born in 1944 in New Jersey, his father a Manhattan pharmacist, his mother a homemaker. He read psychology at Rochester university. Harvard Law School followed, and then a career as a Wall Street lawyer. On the side, he invested his family’s money, and by 1977 he had alighted on a winning formula for “convertible arbitrage” – exploiting price differences between a company’s convertible debt and its shares. With $1.3m from the family pot, he started Elliott Management.

It was not convertible arbitrage that made the firm big but rather its move into distressed debt. It would snap up loans and bonds owed by companies in trouble and seek to influence the outcome of a bankruptcy, usually asserting itself as a representative of groups of creditors. After almost four decades of 14 per cent compound annual returns, Elliott is a multi-strategy fund with $24bn in assets across global markets. Investors include former US presidential candidate Mitt Romney and New Jersey’s pension fund.

Mr Singer is cautious and professorial when speaking in public about Elliott or markets, and no less serious in private. When a journalist from Euromoney magazine asked if the legal chase might not be a little fun, he was met with a look of incomprehension and astonishment. “Fun? Skiing is fun. This is work.”

Skiing is fun; so is rock ’n’ roll with the family band: Mr Singer on piano, one of his sons on guitar, the other on drums, his son-in-law on saxophone. At a private party in Manhattan, he jammed with Meat Loaf.

And then there is Arsenal. In New York, Mr Elliot can sometimes be found watching the Premier League football side in a local bar. He also jets in to London to see the team at its Emirates stadium in north London with his son, Gordon, who runs his UK office.

His younger son, Andrew, a doctor in New York, married his husband in Massachusetts in 2009. Mr Singer talked at Davos this year about how his son coming out changed his views. “It was something that was beyond my understanding at the time,” he said. “After a series of mutually supportive conversations, I became very educated about gender and sexuality, and I became very enthusiastic about his efforts to stop discrimination.”

Mr Singer has put an estimated $10m into the gay marriage fight, and marries his views on this subject with strong fiscal conservatism. Having favoured former New York mayor Rudy Giuliani for president six years ago, he backed the hawkish Paul Ryan for the Romney ticket two years ago. Stung by the harm done by no-hope Tea Party candidates in congressional elections, this year he has channelled his informal billionaires’ club towards a new super political action committee to concentrate spending on electable candidates.

“I wasted a bunch of money early on giving to very nice people who were not ready for prime time,” says Cliff Asness, founder of hedge fund AQR and a trustee at the Manhattan Institute, a rightwing think-tank Mr Singer chairs. “Paul says that if you are going to make a difference, you need to raise your game. He is always asking: what am I getting for the buck?”

The writer is the FT’s US investment correspondent

Twitter: @stephenfoley

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