One of the hedge fund industry's biggest annual conferences went off with a bang yesterday, as two of the business' biggest names took the stage.
Harbinger Capital Management's Philip Falcone and Elliott Associates' Paul Singer headlined the SALT Conference's first day at the Bellagio Hotel and Casino in Las Vegas, which also featured former Vice President Al Gore. But all eyes were on Falcone, who is struggling to save the wireless Internet venture that he has poured more than half of Harbingers' assets into.
Falcone only briefly—and obliquely—touched on his troubles with LightSquared, which is negotiating with creditors to avoid either a default declaration or a bankruptcy filing. The company was sent into a tailspin in February when the Federal Communications Commission withdrew a crucial waiver, citing concerns about interference with global positioning systems.
"The new wrench is the regulatory environment and that's a whole different dynamic that's almost unanalyzable," he said during a morning panel. "And personally, I'm going through an issue right now where because of a policy change, it creates investment issues."
Falcone made the remarks as part of a broader discussion of the increased—and, in his opinion, unwelcome—role of regulation in the markets. He also told the 2,100 attendees that he'd like to have a permanent capital vehicle, no surprise, given how redemptions have helped shrink Harbinger's assets under management to a fraction of their former level.
"Buying control of companies, buying 100% of companies, that's where I think a great opportunity is," he said. "If you have the right vehicle, it's a huge opportunity."
Falcone also faulted investors' insatiable appetite for liquidity, arguing that it keeps hedge funds from mining that opportunity.
"Most managers today are paying much more attention to liquidity and liquidity is really driving how people invest," he said. "People are passing up, I think, pretty solid opportunities that are relatively illiquid because of the uncertainty that the investor base brings to the situation for whatever reasons they're dealing with."
Why would a man facing huge problems with his hedge fund agree to speak at SALT? It seems Falcone had an experience common to industry players: gentle arm-twisting on the part of Anthony Scaramucci, head of SkyBridge Capital, which hosts the shindig.
Scaramucci said he ran into Falcone at a fundraiser and said, "You should get the opportunity to express yourself to your peers."
Also hitting the stage at SALT was Singer. Instead of using the forum to hammer away at his bête noir, President Barack Obama, Singer turned sage, imploring his listeners to get in touch with their "existential humility."
"One of the biggest enemies of our long-term portfolio performance is ourselves," he said, Zen-like.
"'What am I missing?' is a much more important question than 'How cool am I?'" Singer philosophized. He warned his colleagues against growing complacent or buying into their own hype, both of which are "absolute death."