July 31, 2015 / 12:29 AM / 2 years ago

Hedge fund Elliott eyes fresh market turbulence

Paul Singer of Elliott Associates speaks during the Ira W. Sohn investment research conference in New York May 27, 2009. REUTERS/Lucas Jackson

BOSTON/NEW YORK (Reuters) - Paul Singer’s $27 billion hedge fund Elliott Associates is worried about Europe’s prospects and is bracing for fresh market turbulence.

In a letter to investors dated July 23 and seen by Reuters on Thursday, the New York-based firm told clients that it has returned 2.8 percent in its Elliott Associates, L.P. and 2.2 percent in its Elliott International Limited.

While both funds beat the Standard & Poor’s 500 Stock Index’s 1.2 percent gain, the fund spent pages explaining its more cautious approach and warning that even after a six-year bull market in stocks, there is “no such thing as a permanent trend in the markets.”

It worries about central bankers’ easy money policy noting that governments that have “abused the power to create ‘money’ have always, eventually, paid a huge price for their profligacy.”

“We are not bragging about our record, nor do we feel defensive about not keeping up with the S&P 500 in the last few years,” adding that it invests carefully especially at a time it sees more chance for severe market turmoil.

It also expressed concern about Europe even after the region found a solution to Greece’s debt problem and worries that long-term problems have not been adequately addressed, possibly causing “the breakup of the euro.”

“The bottom line in our view is that Europe is in a very difficult situation,” the fund wrote.

Still Elliott sees what it calls “attractive opportunities in the activist equity area and a few interesting situations in event arbitrage.” The firm recently lost a campaign to block the merger of two Samsung affiliates in Korea.

It also said it is cooling on real estate investments, noting “the balance in our real estate securities trading has turned to the sell side.”

The firm recently raised $2.5 billion in new capital, calling it “dry powder.”

But it also warned investors in the normally secretive hedge fund world to stop sending its closely followed letters to journalists and others.

“We have learned the identities of certain individuals who breached their confidentiality obligations by disclosing the contents of Elliott’s quarterly reports,” the firm wrote adding “We are taking action and seeking monetary damages from violators.”

The Wall Street Journal first reported on Elliott’s tough stance to keep its letters private.

Reporting by Svea Herbst-Bayliss; Editing by Lisa Shumaker

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