Brocker.Org: A legendary hedge fund that raised $5 billion in 24 hours expects ‘all hell to break loose’

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Paul
Singer.

World Economic Forum via
Flikr


A hedge fund led by an investing legend expects “all hell to
break loose.”

Billionaire Paul Singer’s Elliott Management, which
raised $5 billion in less than 24 hours earlier this month
,
says it has been building up its cash reserve to deploy during
future market turmoil.

The hedge fund has been
sounding the alarm for some time
. But its most recent letter
sets out why the fund decided to raise additional funds.

“We think that it is a good time to build a significant amount of
dry powder,” Elliott wrote to investors in a first-quarter
update, a copy of which was reviewed by Business Insider.

It added:

“Given groupthink and the determination of policymakers to do
‘whatever it takes’ to prevent the next market ‘crash,’ we think
that the low-volatility levitation magic act of stocks and bonds
will exist until the disenchanting moment when it does not. And
then all hell will break loose (don’t ask us what hell looks
like…), a lamentable scenario that will nevertheless present
opportunities that are likely to be both extraordinary and
ephemeral. The only way to take advantage of those opportunities
is to have ready access to capital.”

Elliott highlighted a chapter during the financial crisis to
explain its choice to raise more money ahead of investment
opportunities.

In 2008, the hedge fund said, it invested all of the remaining
capital investors had committed to it shortly after Lehman
Brothers failed, and also raised an additional $800 million. The
hedge fund said it “could have deployed ten times as much in what
turned out to be amazing (and fleeting) opportunities.”

The firm managed about $33 billion as of April 1, the letter
said.

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