"Strong-arming his way to profit"
Paul Singer known as the vulture capitalist is feared by most CEOs, rival hedge fund managers and even countries!
Paul Elliott Singer is an American billionaire hedge fund manager, activist, investor, and philanthropist, with a net worth of $3.5 billion. His hedge fund, Elliott Management Corporation (EMC), specializes in distressed debt acquisitions, the reason he is called a ‘Vulture Capitalist’. Singer is also the founder and CEO of NML Capital Limited, a Cayman Islands company.
The Elliot Tactics: How did Singer manage to accumulate such a huge portfolio?
His main investment strategy primarily focused on distressed assets. A distressed asset is an asset that is being sold because its owner is forced to sell it. Distressed assets usually sell for below their perceived value due to the fact that the owner is being forced to sell. Distressed debt scenarios or any investment scenario dealing with a financially distressed company, can offer fantastic opportunities. Most investors are afraid and avoid touching them. Very few have the skill or confidence to succeed consistently. Singer’s approach is not all aggressive and risk hungry. Yes, he aims for high returns, but his first goal is capital preservation.
Many investors indulge in risky and aggressive assets classes, but a lack of attention to risk management can easily lead to a downfall in the end. Singer, on the other hand, continues to be grounded in reality. His first responsibility is clear and he strives to always keep it in his sight: Protecting his capital base.
Paul Singer bought up sovereign bonds cheaply, and then went after countries for unpaid debts. In 1996 Elliott bought defaulted Peruvian debt for $11.4 million. When former president of Peru Alberto Fujimori was attempting to flee the country due to human rights abuses and corruption, Singer confiscated his jet and offered to let him leave the country in exchange for $58 million payment from the treasury. Fujimori accepted!
Argentina defaulted on its debt in 2002. The Elliott-owned company NML Capital Limited refused to accept the Argentine offer to pay less than 30 cents per dollar of debt. Elliott sued Argentina for the debt's value, and successfully appealed to the UK Supreme Court. The court ruled that Elliott had the right to attempt to seize Argentine property in the United Kingdom. In February 2013 the U.S. appeals court heard Argentina's appeal in the case of its default and debt to NML. In March 2013 Argentina offered a new plan, which was dismissed first by the lower courts and then the United States Court of Appeals for the Second Circuit on August 23, 2013, and then again in June 2014 in the U.S. Supreme Court. In March 2014 NML Capital even attempted to satisfy court awards by suing SpaceX, seeking the rights to two satellite-launch contracts bought by Argentina valued at $113 million, but it was unsuccessful. In February 2016 Argentina reached an agreement with Singer. This is where Singer’s aggressive reputation comes from. He has been heavily criticized for using these methods. But, on the other hand, he is known as the ‘Pioneer of buying sovereign bonds on the cheap’.
In 2018, Singer became the owner of the Italian football club, AC Milan, after the previous owner defaulted on a 37 million US dollar loan payment owned to Singer's hedge fund. Paul Singer himself defends his business model by saying- "a fight against charlatans who refuse to play by the market's rules".
According to Singer, these things don’t arise out of his desire to fight with people. Singer found out that Manual effort was actually not only a driver of value and profitability but an important way to control risk and dig your way out of a hole when you slip and fall. Make something happen, become part of the process, try to control your own destiny. Don’t just ride up and down with the waves of the financial markets.
The Predictor of Crisis:
Everyone is aware of the Global Financial Crisis (2007-09). Even before the financial crisis, in 2007, Singer famously tried to warn policymakers about the dangers of exotic mortgage derivatives. Taking the most recent crisis into account, the pandemic which surfaced in late 2019 and was widespread in 2020, Singer warned his employees in February to prepare for lengthy quarantines due to coronavirus which was more than a month before US officials started preparing. This means, that while the world was still going to theatres, sports and restaurants, Singer was already planning for the lockdowns. Singer wrote a letter to his employees informing them to stock up on medicines, food and water in preparation for a long quarantine and warned against public places for the next few months.
But why is this significant? As global markets collapsed in March 2020, Elliott remained flat due to hedges offsetting losses elsewhere in the portfolio. The protected gains made earlier in the year, brought Elliot's return to 2.2 percent in the first quarter of 2020. On the other hand, hedge funds fell approximately 7 percent in March 2020, on average.
Hater of Bitcoins:
“Pulling out your hair is an option, though only if you have hair to spare, hiding under the bed to avoid people who gloat about being long Bitcoin can get…tiring. Deep breathing exercises can work, but only for short periods. We continue to press on for the day when we can say, ‘We told you so’”. These are the thoughts of the mostly bald Paul Singer on Bitcoins.
According to him, Bitcoin is one of the most brilliant scams in history. Singer suggests that in the future, bitcoin would falter and he cannot wait to say “We told you so”.
On a lighter note:
Although called a vulture, aggressive and criticized by many, Singer is also very philanthropic. Singer has reportedly signed ‘The Giving Pledge’, signaling a promise to donate more than half of his wealth during his lifetime. He has also founded the 'Paul E. Singer Family Foundation' which provides support to charitable causes such as the 'Harvard Graduate School of Education', 'Food Bank for New York City' and the 'Leukemia & Lymphoma Society', to name a few. Singer is also responsible for 'The Philos Project' which is a pro-Israel Christian Organisation. After the Pittsburgh synagogue shooting Singers family foundation donated 1 million US Dollar to upgrade security at Jewish institutions in New York.