Paul Singer's Elliott Management Discloses Five Major Investing Lessons

May 26 2017 | 8:13pm ET

Paul Singer’s activist hedge fund manager Elliott Management has reportedly disclosed some of the core lessons it has learned over the years in a private letter to investors. 

In the letter, Elliott said that while it needed to learn some of the lessons the hard way (i.e. directly) in order to deeply incorporate them, some were "gleaned secondhand", according to a Business Insider article that described reviewing a copy of the letter. 

Elliott’s five lessons:

  • No security price is too high (or low) that it cannot go higher (or lower)
  • Turns in markets are impossible to time
  • Big changes in market prices frequently occur far in advance of when the reasons for the changes become apparent, and by then it is too late to incorporate the new information into one’s trading at the old prices
  • One of the most important reasons to avoid significant losses is to avoid the painful and sometimes terminal effect of severe adversity on the quality of money managers’ decision-making processes
  • A wide and deep education about the world, not just about capital structures, corporate business strategies and industry dynamics, is essential to the long-term success of money managers.

These missives, or rather the lessons they represent, have assisted Singer’s $33 billion hedge fund in shaping the firm’s attitudes towards “trading, investing, predictability of markets, risk management and building an organization," the article continued. 

Elliott, which raised $5 billion in fresh capital in less than a week in early May, was founded by Singer in 1977 and has since become one of the world’s most successful investors. The firm currently manages approximately $33 billion through a number of investment vehicles active in debt, equities, commodities, currencies and various other asset classes. 

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