| Paul Singer, Elliott Management Corp. (Photo credit: Bloomberg) |
Last year was mostly a mediocre one for multistrategy hedge funds. Most were up in the low- to mid-single digits, although there were some outliers.
As one fund-of-funds manager tells me, “There was no breakout strategy.”
Given that backdrop, it’s especially impressive that Elliott Associates posted a 13.1 percent gain for 2016 after surging 4.4 percent in the fourth quarter. This performance easily exceeded the 9.5 percent gain for the Standard & Poor’s 500 stock index. It was also Elliott’s best year since 2012, when it was up 13.4 percent.
Besides topping most of the large multistrat vehicles, Elliott bested a large number of hedge funds in general.
Elliott Associates, launched in 1977, is the flagship fund run by Elliott Management Corp., the New York–based firm headed by Paul Singer.
It’s not clear what drove results in the fourth quarter. The firm, which manages roughly $30 billion in assets, declined to comment. However, it wouldn’t be a leap to assume that Elliott participated in the equity rally, especially given its many activist targets.
In the third quarter, when Elliott was up 3.1 percent, returns were driven by distressed securities, performing debt, event arbitrage, commodities trading, and portfolio protection trades related to rates, according to the firm’s quarterly letter. During that period it lost money from equity-oriented trades and portfolio protection trades related to equities and credit.
Although Elliott invests across a number of strategies, it is best known for its activist activities. On Thursday it signaled a possible new target by disclosing that it owns 8.3 percent of the Advisory Board Co., a health care consulting firm.
In a regulatory filing, Elliott said the stock is “significantly undervalued” and “an attractive investment opportunity.” The fund added that it’s seeking “a constructive dialogue” with the board of directors.
But at this point Elliott concedes that it has no plans or proposals for Advisory Board. Given Elliott’s history, though, the word “yet” would be appropriate. The regulatory filing uses boilerplate to suggest a menu of issues that may come up in discussions, including board composition, the company’s capital or corporate structure, dividend policy, or transactions of various kinds.
Earlier this month Marathon Petroleum Corp. provided details about the ways it plans to boost shareholder value in response to pressure from Elliott, which owns 4 percent of its stock. For example, the energy giant said it expects to “drop down” about $1.4 billion worth of assets to its master limited partnership, MPLX, sometime this year, in exchange for newly issued MPLX common units. Marathan also said it will look for ways to monetize its Speedway retail chain of gas stations, including a possible tax-free separation.
In recent years Elliott Management has shown a strong interest in taking activist positions in technology companies.
Late last November, for example, it announced a new position in Cognizant Technology Solutions Corp., an IT consulting and services firm in which it owned a stake of more than 4 percent. It also fired off a 16-page letter outlining what it called a three-part value enhancement plan, which Elliott said could boost Cognizant’s stock by 50 percent to 60 percent in a little more than a year. Elliott requested a meeting with the company’s board too.
In early October, Elliott disclosed an 8.1 percent stake in Mentor Graphics Corp., asserting that the electronics design automation company’s shares are deeply undervalued and that it has spoken with management and the board about ways to boost the stock price.
In June, Elliott said it owned 8.8 percent of LifeLock, an identity theft protection specialist, and went on to increase its stake to 10.9 percent by August.
Last year Elliott saw many of its earlier activist campaigns pay off.
For instance, in October computer maker Dell agreed to acquire data storage giant EMC Corp. for $60 billion after Elliott urged EMC to break itself into two entities.
In June software developer Qlik Technologies agreed to be acquired by private equity firm Thoma Bravo for about $3 billion in cash three months after Elliott disclosed an activist stake.
Elliott also isn’t shy about taking on governments or other corporate entities.
It is currently suing Mossack Fonseca & Co., the Panamanian law firm at the center of the so-called Panama Papers scandal, which saw a trove of documents detailing offshore businesses leaked to the press. The case is related to Elliott’s earlier, successful battle with Argentina over thecountry’s defaulted debt.
