News Column

The hedge fund manager: Another side of 'vulture' behind default

August 1, 2014

Simon Goodley

Paul Singer is not your average Wall Street hedge fund manager. He fits the stereotype in certain ways - he's incredibly rich, a recurrent funder of the Republican party and is the investor most closely associated with bringing Argentina to its latest default. But he has another, less conventional, side.

When a 2011 vote to legalise gay marriage in New York state was facing defeat, he persuaded a group of hedge fund managers to throw campaign funds at twitchy Republicans who were worried their support might provoke the party's conservative wing to unseat them. This money was said to have swung the vote.

Singer has also emerged as a man with unconventional views about an electromagnetic pulse destroying the world. In his latest note to investors in his Elliott Management hedge fund, which has been seen by the Financial Times, he wrote: "While these pages are typically chock-full of scary or depressing scenarios, there is one risk that is head and shoulders above all the rest.

"Even horrendous nuclear war, except in its most extreme form, can be a relatively localised issue, and the threat from asteroids can (possibly) be mitigated. The risks associated with an electromagnetic pulse, or EMP, represent another story entirely."

It is not quite clear where his interest in EMP comes from, although the genesis of his devotion to gay rights is very clear. His son Andrew, a doctor in New York, married his husband in Massachusetts in 2009 and Singer talked at Davos this year about how his son's coming out transformed his perspective "about gender and sexuality, and I became very enthusiastic about his efforts to stop discrimination".

Singer remains best known as the founder of Elliott Management, which controls about $17bn (pounds 10bn) from its New York offices, and his strategy of buying distressed debt - loans that governments have been struggling to repay and can therefore be snapped up at large discounts. Singer then aims to either sell them on for a profit when the country's circumstances improve or sue for full payment. Such investors are usually known as "vulture funds" - a term Singer is known to despise.

The strategy has proved profitable. Singer spent $20m in 1995 on defaulted debt from Peru, and then successfully sued for $58m. He acquired a $30m debt owed by Congo-Brazzaville at a cut-down price, and was awarded more than $100m in interest in 2002 and 2003.

His latest move has revolved around a decade-long legal fight between the Argentinian government and a group of hedge funds led by Singer, owed debts which date back to the collapse of the Argentinian economy in the early 2000s. Unlike more than 90% of the other Argentina bondholders, Singer refused to restructure their investment.

Singer won the court battle, resulting in the south American country defaulting again this week, as holders of the restructured debt didn't receive hundreds of millions in interest payments.

It is still unclear exactly how all this will play out, but despite Singer's track record, he doesn't always end on the winning team. In 2012 he persuaded a Ghanaian judge to hold an Argentinian navy vessel in port until he was paid the millions owed to him. But Argentina successfully argued in the international tribunal for the law of the sea that the ship should be returned.

Elliott Management did not respond to the Guardian's request for comment.


Paul Singer: despite successes, he does not always end on the winning team

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Source: Guardian (UK)

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