After raising $13 billion in 2022, the billionaire Paul Singer’s Elliott Management raked in another sizable haul over the past six months.
The $66 billion firm closed its 10th “dry powder” fundraise in April, according to a recent letter to investors seen by Business Insider, pulling in $8.5 billion in new capital that the manager can call anytime over the next two years. Original reports on the fundraise said the firm was targeting up to $7 billion in new money, but it surpassed that by more than 20%.
Elliott — known for both its bruising activist campaigns and its bets on distressed opportunities — is gearing up for a market downturn given the “inexorable levitation” of the markets. The hedge fund returned 2.5% to investors in the first quarter.
“Elliott’s view of the current environment is that most stocks and bonds are at dangerously high valuations and have inadequate (given the risks) forward rates of return,” the letter, dated April 30, said.
The manager said it believed the Federal Reserve didn’t “not know much more about the prospects of inflation and market vulnerability than the rest of us mortals” and that concentrated passive investors, record levels of government debt, and potential currency weakness all pointed to signs of a bubble.
“Historical and mathematical fact can get lost in the excitement when stocks are on a tear,” the letter said.
The opportunities are there, though, including in event-driven activist trades and arbitrage bets. The firm recently took a $2.5 billion stake in Texas Instruments, calling on the 94-year-old company to improve its free cash flow. In credit, distressed openings are “building,” the firm said, especially in commercial real estate, which is looking at a prolonged downturn.
Meanwhile, gold — a long-standing position — “has never lost its allure,” it said.
“Gold is still under-owned by investors, its supply cannot be expanded easily or quickly, and we believe that if it becomes a ‘must-have position,’ the doorway through which institutions can acquire a sufficient amount is incredibly narrow and could result in much higher prices than most people can imagine,” the firm wrote.
But the overarching focus of any portfolio is to beat its benchmark, and Elliott wrote that it had seen theirs as “cash” for the 47 years the firm has been around. The manager doesn’t chase “YOLO clown cars” in hopes of making quick profits and hedges everything because “nobody can predict market moves accurately and consistently,” it said.
“Markets are funny. Not ‘ha ha’ funny, but rather in the ‘strange’ sort of way,” the letter added.
Even with the expectation that bargains are around the corner, the firm has no plans to “back up the truck” on any positions because you never know what deal might materialize around the corner.
“The trick is not to lose too much money in the bargain phase, which always precedes the really big bargains, which always precedes the insane bargains, which always precedes the magical moment when for no particular reason, markets turn,” the last line of the 24-page letter said.
