Paul Singer and his son Gordon are not household names but mere mention of them is enough to send shockwaves through boardrooms.
Their £25 billion hedge fund Elliott Advisors is one of the world’s most tenacious activist investors.
It targets bumbling boards and undervalued firms and is cutting a swathe through British companies, where it has built up stakes worth £2 billion this year alone – on top of billions invested in UK firms it had previously targeted.
Paul Singer and his son Gordon are not household names but mere mention of them is enough to send shockwaves through boardrooms
In the past month it has taken aim at Costa Coffee owner Whitbread, troubled shopping centre giant Hammerson and Britain’s biggest IT firm Microfocus. It has also agreed to buy a controlling stake in books chain Waterstones.
Another firm in its sights is BHP Billiton, whose board is resisting Elliott’s blueprint to add £16 billion to the London-listed miner’s value.
Whitbread has already bowed to pressure, promising to separate Costa from its hotels within two years. But Elliott, now the largest shareholder, says that is not quick enough. Next month’s annual meeting will be uncomfortable for boss Alison Brittain if others agree.
Britain has become a hotspot for Elliott which has disclosed eight shareholdings in Europe this year to the end of April, up from three last year. Most are in the UK.
Like the US branch, the British arm of Elliott – run by Gordon – has gained a reputation for cold-hearted capitalism. But is it a vulture or is it doing shareholders a favour by shaking up sleepy management?
Activist investors say they are putting the human element back into investment management, arguing that many funds now rely too heavily on computers to trigger automatic trades based on share price movements.
A source at a rival activist fund said: ‘Investors have become very passive. Trading by algorithms has increased. Now there’s a gap, particularly when a share price seems to be languishing, being filled by activist investors who aren’t afraid to challenge company boards.’
Elliott itself is very clear: it is not one of the bad guys. It says boards that fail to do their legal duty to pursue the best interests of shareholders are inviting trouble. It insists it is not just in for the short-term.
The £25 billion hedge fund Elliott Advisors is one of the world’s most tenacious activist investors
Paul, 73, is based in the US where he has taken an active role in gay rights ever since his younger son Andrew came out. That has included funding support for gay rights and vocal support for same-sex marriage, which has put him at odds with the Republican Party he otherwise supports. By contrast, Gordon, who works out of an office in Oxford Street, is so publicity-shy, there are hardly any photos of him. But both share the same laser-like eye for chances to make money.
Their modus operandi is to embark on exhaustive research, sometimes taking months, or even years, to compile lengthy dossiers.
And they are prepared to play hardball. In March, Elliott – which is Paul Singer’s middle name – supported Melrose’s controversial bid for GKN with a crucially-timed condemnation of GKN’s ‘unimpressive’ management.
The reputation as a ruthless predator is dismissed by Singer as ‘opprobrium’. But he adds: ‘If that’s the reputation we have, it’s good when an executive opens the email or picks up the phone,’ he says, because they know Elliott has ‘a history of carrying through’.
Singer senior was locked in more than a decade of wrangling with the Argentine government over lapsed debt repayments – and won a court order to detain an Argentine navy vessel docked in Ghana.
He began his investment career trading ‘tiny amounts’ with his father. ‘He and I found just about every possible way conceivable to lose money,’ he said. ‘So, when I founded Elliott in 1977 I was determined to engage in a trading strategy that made money all the time.’
He began with $1.3 million, which mainly came from family and friends. Over 40 years, his fund turned a $1 investment at that time into $165, he estimates.
So whatever your view of Elliott’s tactics, they have produced rich rewards.