Paul Singer hates benchmarking

By Lawrence Delevingne

Mon Aug 5, 2013


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The Elliott founder rails against facile comparisons in a recent letter to investors.


   Paul Singer of Elliott Management
   Paul Singer (Photo: Bloomberg)
Paul Singer doesn't like being compared to other hedge fund managers--even if Elliott Management Corp. easily beats most of its peers.

"We also try really hard not to be benchmarked against other funds, in order to create as much 'breathing room' as possible," Elliott 's July 30 letter to investors said. "Sometimes we do well and sometimes we struggle, but the last thing we want to hear when we hit a soft patch (and the least helpful when trying to dig our way out) is a question about our performance relative to someone else's."

The comments come as the flagship multistrategy Elliott Associates fund (onshore) is up 5.3% net of fees through June. As Elliott itself notes in the letter, the S&P 500 Index (with dividends) rose 13.8% and the Citigroup Broad Investment-Grade Bond Index fell 2.5%. The Absolute Return Multi-Strategy Index, which tracks other hedge funds investing in a range of markets, was up 4.31% during the same period.

Most brand name competitors were roughly in line with both Elliott and the Absolute Return index. Examples of large multistrategy funds include GoldenTree (up 5.38% through June); Highbridge (3.63%); Hutchin Hill (10.09%); Millennium (5.99%); Och-Ziff (6.48%), Perry (9.35%); Pine River (6.83%); and York (5.11%).

"The fact is that sometimes when we outperform another fund, their results should actually be viewed more favorably than ours because we should have done even better, and sometimes the opposite is true," the Elliott letter said. "But as much as we sympathize with investors who want a basis for understanding when their managers are doing well or not, benchmarking is not helpful to us. We are proud of our very long-term consistent results obtained with an extremely low variability of return. That result is what really counts - not what the other person is doing."

Those long-term results are indeed impressive. Elliott Associates has produced a net annualized return of about 14% from its February 1977 inception through June 2013. Elliott's long-term record is one reason it was the eighth largest firm in the Americas at the start of this year. In the decade from 2003 (when Absolute Return began publishing) through 2012, Elliott's flagship fund compounded at 13.72%. Among the top 10 firms of 2013, that put Elliott behind only Baupost (14.8%) and Bridgewater (14.53%). The Absolute Return Multi-Strategy Index produced a net annualized return of 8.62% during the same period.

"During periods of complacency and overpricing (the two usually go hand-in-hand), the task is to erect portfolio defenses and try hard to make some money without stretching parameters," the letter said. "It is not thrilling to make single-digit rates of return, but at times that result may be all that we can achieve under the circumstances."

Peter Truell, a spokesman for Elliott, did not respond to a request for comment.

See also: First half roundup: Caxton, Glenview, Owl Creek gain while Metacapital, SPM, Bridgewater lose | Whale Watch: Q2 2013 | Ten Years of Absolute Return (2003-2013)

ISSN: 2151-1845 / CDC10004H