Underrated: Paul Singer
There is more to the New York “vulture capitalist” who wants Argentina to honour its debts than his critics would have us believe
Billionaire New York hedge funder, massive donor to US conservative causes and candidates, and fervent supporter of Israel — these are all qualities which make Paul Singer an almost perfect target for the Left’s animus. If this were not enough, his fund has bought up Argentine sovereign debt and, while the major banks have agreed to let the country off around 70 per cent of what is owed to them, he is demanding payment in full, plus interest. What is more, Singer is a repeat offender in the “vulture” game — he has previously bought up Peruvian and Congo-Brazzaville debt and used the courts to enforce payment. Third World governments are being forced, or so the argument goes, to spend their scarce resources on paying off foreign financiers rather than seeing to the basic needs of their people — an image can easily be conjured up of a plutocrat stealing food from the mouths of starving children.
Yet the Guardian has said of him, “Paul Singer is not your average Wall Street hedge fund manager.” To its astonishment, Singer is an ardent supporter of same-sex marriage and has spent millions promoting this cause and supporting Republican candidates who share his view.
Singer, now aged 70, set up Elliott Management in 1977 with $1 million of capital; today Institutional Investor ranks it as the world’s 16th-largest hedge fund with roughly $23 billion under management. Elliott has consistently outperformed the markets, generating a 14.6 per cent annual net compound return since its inception; Singer has in the process created a personal fortune of $1.9 billion, according to Forbes.
A major part of Elliott Management’s strategy has been the buying up of heavily discounted distressed debt — usually corporate, not sovereign — and seeking its repayment, if necessary in the courts. Elliott Management bought up Argentine debt at the time of the country’s default in 2002. The debt has since been subject to a restructuring, in other words a waiving of 70 per cent or so of its value, to which 93 per cent of debt holders have signed up. Elliot and the other “holdouts” argue that since they are not party to the agreement they should not be subject to it and have thus pursued legal remedies.
It is Singer’s argument that debt forgiveness does not actually help countries who can afford to pay their debts. Doing so harms their populations by “making investing in their countries more risky and more problematic and by discouraging foreign investment”. The immiseration of the people of Congo-Brazzaville, Peru and Argentina is not caused by the tactics used by Singer and his ilk but by their governments’ lack of concern for their own people’s welfare, by incompetence and, worst of all, by corruption.
What is more, if Singer’s tactics are deemed so appalling it is in the gift of Western governments to stop them. Since 2010 it has been impossible to use the UK courts to enforce repayment of sovereign debt subject to relief. A US president, under the principle of “comity”, only needs to inform a US court that a lawsuit interferes with his sole authority to conduct foreign policy to have it thrown out. George W. Bush invoked this principle to stop Singer’s attempts to seize US assets of Congo-Brazzaville; Obama has chosen not to do the same for Argentina.
According to the Center for Responsive Politics, Singer has been America’s fourth largest donor in the 2013-14 electoral cycle, giving over $5 million so far to his chosen Republican candidates and organisations which support them. As with his investments, Singer takes an activist approach, supporting candidates he deems the best qualified and closest to his outlook — those espousing economic conservatism, social liberalism and an interventionist foreign policy.
The Left will argue that rich donors like Singer create an unfair playing field and give a huge advantage to the Republicans, but the three Americans who have given even more to political causes in this electoral cycle —respectively more than $20 million, $9.5 million and nearly $6 million —all support the Democrats. To be fair, the number two donor, New York’s former Republican Mayor Michael Bloomberg, has been bipartisan: only 95 per cent of his largesse has gone to Democrats.
Singer has also been a key supporter of those think-tanks and magazines which share his outlook. He is chairman of the Manhattan Institute, which his foundation has backed with $600,000 annually, out of the institute’s total budget of $14 million. It is by no means the largest US think-tank — on the conservative side that is the Heritage Foundation — but it still has a larger budget than all UK right-of-centre think-tanks combined: roughly £7.5 million ($12 million).
Unusually among philanthropists Singer understands the efficacy of magazines in promoting a world view. He is chairman of Commentary magazine, the leading voice of neoconservatism in the US. With its annual budget of $2.5 million, less than a fifth of that of the Manhattan Institute, it too has achieved much in shaping opinion. Singer is a canny investor both inside and outside the world of finance.