Several days after Paul Singer released his much anticipated letter to investors (key excerpts here), the founder of Elliott Management was profiled on Bloomberg as the "most feared activist investor in the world—by hedge fund rivals, companies and even countries", and for good reason. Singer’s Elliott Management, which manages $34 billion of assets, has not only rarely been out of the headlines the past 18 months - in the process targeting the world’s biggest mining company, taking on Warren Buffett, ousting CEOs on both sides of the Atlantic and setting off a chain of events that led to the impeachment of South Korea’s president - but as shown in the table at the bottom, has generated unprecedented and consistent returns, putting the rest of the activist sector to shame.
Some more details:
... his impact is undeniable. He started with just $1.3 million from family and friends in 1977, and the fund’s investments in equity and debt have since led to at least $93 billion in corporate asset sales and share buybacks, according to data compiled by Bloomberg.
While he’s been scorned for employing bullying tactics at times, Singer doesn’t worry about his tough reputation. He sees it as a selling point for his investors.
“It doesn’t bother me anymore,” Singer told Carlyle Group LP co-CEO David Rubenstein in a Bloomberg TV interview. “It’s good when a corporate executive listens with the understanding that we are real, that we have the capacity to carry through.”
The above also explains why investors of all ideological persuasions find Singer's periodic letter such an enthralling read. Below we repost the most controversial excerpt from his latest note, wherein the billionaire investor lashes out at "safe spaces" not only across countless U.S. university campuses, but also into the context of the "intellectual fragility" and "fetal position" which "extends to the vast community of global investors" courtesy of central banks who have become terrified of letting the market trade on its own two feet.
Fifty or so years ago, campuses across America raged in support of free speech. Fast forward to the present, and we rub our eyes to see a 180-degree turnabout in rage-worthiness. Currently, many students on a variety of campuses are rallying against free speech. The "diversity" that almost all. American colleges and universities claim to covet does not really exist, at least with respect to viewpoints, due to the ideologically extreme tilt (to the left) on virtually every "elite" campus. This bias is unfortunate, because intellectual and ideological diversity would be an effective tool in the creation of new generations of citizens and leaders who think for themselves, not just march in lockstep with the orthodoxy of the day.
But alas, intellectual and ideological diversity does not seem to have a high priority on many campuses. Philosophical and political imbalance is so extreme at a number of such institutions that a growing movement seeks to create "safe spaces" (both geographically and in terms of acceptable speech) so that the apparently fragile-as-eggshells students are not "assaulted" by opinions or thoughts that differ from those in their "Little Red Books." At many colleges today, the enforcement of the 2017 version of Mao's Little Red Book is by peer pressure, shouting down, and, on the vanguard of the "Free Speech If You Dare" movement, actual violence.
This fragility, an intellectual fetal position of sorts, apparently extends to the vast community of global investors. We make that assertion on the evidence that almost nine full years after the GFC, central bankers and policymakers are treating every single hiccup and little twitch in global stock markets as worthy of calming words and the promise of action "as needed." This treatment of markets as being perpetually an inch away from a fatal attack of the vapors is remarkable at a time which is so long after the actual emergency period. As in the case of university students, protection against both the nonconforming ideas of others and freely determined prices (the capital markets version of safe spaces) will lead inevitably to more — not less — vulnerability, dysfunction and ultimate risk.
In fact, central bankers who are desperately attempting to keep asset prices well above their free-market values serve to create the very opposite of a "safe space." It is actually a brittle and unsustainable space — brittle because nobody knows when the artificial constraints on volatility and price-discovery will suddenly and tectonically shift and return closer to historically-normal levels.
One has only to curl up for a few hours with some readings from pre-historic times (1995, 1998, 2000, 2005, 2007 and 2008) to see the massive shifts in the perceptions of investors, policymakers, economists and over-educated and under-sentient central bankers about riskiness versus safety, extreme versus reasonable government measures, and consequences that can flow from any set of leverage, fiscal policy mix and interest rate policy. The near-universal attitude today seems clearly to be that central bankers have it all under control, that market volatility is a thing of the past, and that the continuation of unprecedentedly low interest rates and constant building of central bank balance sheets (far more extreme than the monetary policies which delivered the GFC to the world) is not a source for worry. There is no significant constituency shouting for the central bankers to stop what they are doing. In a way, this reticence is understandable to anyone who lived through the GFC and who has read the statements of policymakers and pundits in the years leading up to the 2008 crisis. Unfortunately, as usual, there are no real insights as to when the landscape will jolt and toss people from their comfortable seats, shocked by the (re-discovered) reality that central bankers and policymakers know very little that is worth knowing about the future. Policymakers and investors would be well-advised to substitute sound, conservative monetary policies for their smug belief in the "sophisticated" programs, models and opinions of the highly trained so-called "experts" in the art of economics.
You think we are exaggerating in our undisguised disdain for central bankers and what they actually know? Consider this: Fed Chair Yellen recently stated that there will be no new financial crisis in our lifetimes. We feel faint.
As for Singer's returns, here is a recent summary, courtesy of Bloomberg: