I always thought that the saying that hedge funds are evil was a term used to describe the culture back in the day. Bill Ackman recently opened up about how Elliott were betting against his holdings in order to buy his stock cheap.
Is this an Elliott thing or have you guys seen more of this in the HF industry?
Any stories really appreciated!
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Sources: Any info on Elliott?, Howard Hughes - Bill Ackman's Real Estate Empire, Elliott Management Recruiting, It's getting ugly out there - Baly to cut 13 stock teams, Eric Mindich’s Eton Park Hedge Fund to Close Down and Who's Next ?
Elliott is a bit aggressive on its activist investing side, now if you are doing activist investing you will naturally need to be confrontational/aggressive, but Elliot is known to push the line. There was an article on how some CEO related to Bush was under attack by Elliott and they sent his wife pictures of him hanging out with a female friend and also publicized his divorce filings.
That’s crazy
I mean there’s aggressive/confrontational and there’s trying to destroy someone’s life for returns. Crazy to me but I guess that’s the game!
Thats not the game theyre just pricks
Now that is a wild story as well and I guess there is no line that’s too far!
To be honest, I don't understand how betting against certain people isn't possible within the hedge fund industry. You can do it by looking at Ark Investment's daily trades
You didn't understand it. Elliott bought into PSH.NA, which is a closed-end fund... effectively a publicly traded vehicle that holds the same stocks as the main PS fund. Elliott noticed PSH was trading at a big discount to NAV, so they bought PSH and shorted the underlying holdings (which are publicly reported) as a hedge. This is textbook arbitrage, but because it involves Ackman people get all excited about it.
Boaz Weinstein at Saba has been pursuing a lot of fights like this against closed-end funds in the past couple of years.
Did Elliot actually have the view that his holdings were overvalued or did they short the holdings because the price of the closed end fund would decrease and they can buy it up cheap?
What do Elliott stand to gain from that? Do they get the clientele?
Thanks for clarifying.
It's not that complicated. They went long PSH and they went short the stocks PSH owned. Naturally, they expected the value of each side to converge.
I think Ackman makes it sound like Elliott was betting that his fund would shut down and liquidate, since that way the bet would hit maximum payoff. Regardless of Elliott's intent, MMPM is right, they would've made money had the value of the fund simply converged with the underlying stocks.
There's an interesting New Yorker article on Elliot/Paul Singer that mentions some of their past tactics...
Wouldn’t doubt it. Elliott once held an Argentine warship hostage for weeks. Shit culminated in an armed standoff and he still didn’t back down. Paul Singer has no line he won’t cross to get returns, so this sounds about right.
I cannot believe the drama and angst coming from a very vanilla closed end fund arb trade, one of the most boring things in the world.
I don't think Gordon Singer's guys in London were sitting there thinking "how can we stick it to Bill Ackman". They do CEF arbitrage like many other event/situation driven investors. CEF arb has been a particularly fruitful strategy in the past 3-5 years driven by yields and higher-for-longer. Like any other business, when a business / CEO messes up, there's a transformational change which equates to an opportunity.
Ackman did what Ackman does by talking his own book in public as a way to crystalizing his thesis. In hindsight, it turned out to be one of many "always wrong, never in doubt" type bets, which meant losses on the expense of his LPs in PSH and investors in his Amsterdam listed vehicle. At that time, given how much he lost, there was a strong reason to believe he would need to liquidate the Amsterdam listed closed end vehicle.
End of each year I'd assume Elliott does what everyone else do and look at the total alpha pool relative to their own returns, and with a deal like that splashing all over the headlines the question shouldn't be 'why Elliott did it', question should be why shouldn't they? It was CEF arb 101 type play.
Now we all love an underdog story being spun on a Lex Fridman interview. And Bill is no stranger to storytelling, esp when it serves in his interest. So whilst it's entertaining to listen to, business is business, and Elliott need to capitalize on their addressable opportunity set.
Arguably, they care less then others when it comes to pissing off other financial investors, regardless if it's blocking EQT or Bain Cap from completing public-to-privates, or calling out high profiled CEOs. Gotta respect that... They'll take on anyone. David or Goliath. Their multi-decade returns speak for itself.
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