Key Takeaways
- • Union-backed report accuses Elliott Management of significant underperformance: The Communication Workers of America and SOC Investment Group released research claiming Paul Singer's $48 billion activist hedge fund underperforms both public market benchmarks and peer funds on a risk-adjusted basis.
- • Elliott trails S&P 500 and balanced portfolios over multiple time horizons: Over five years (ending March 31, 2021), Elliott gained 9.2% versus the S&P 500's 16.3% and a 60/40 stock-bond allocation's 11.2%; over the prior 12 months, Elliott returned 14.8% while the S&P 500 returned 56.4%.
- • High fee burden identified as material drag on pension fund returns: Missouri State Employees' Retirement System paid 4.9% in fees on its $193 million Elliott International investment, substantially above the ~2% typical for alternatives portfolios overall.
- • Activist targets underperform post-intervention: The report documents that Elliott's target companies' performance declines in the three-year period following Elliott's activist involvement.
- • Report urges pension funds to reassess Elliott investments: Union groups explicitly warn large institutional investors, including pension funds, to exercise caution when allocating capital to Elliott Management.
Summary
A newly released union-backed report has mounted a direct challenge to Elliott Management's reputation and performance record, using metrics and institutional investor scrutiny to question whether the prominent activist hedge fund justifies its fees and strategic impact.
The report, authored by the Communication Workers of America and the SOC Investment Group (affiliated with the Strategic Organizing Center), accuses Paul Singer's $48 billion firm of "significant underperformance" and warns pension funds and other large institutional investors to proceed with caution before committing capital. The timing and approach represent a tactical reversal: critics are now applying the same shareholder pressure and performance-based criticism that Elliott itself has long wielded against portfolio targets.
The performance data cited in the report reveals a consistent pattern of underperformance relative to simple, low-cost alternatives. According to pension documents from the Employees' Retirement System of the State of Rhode Island, Elliott Management gained 9.2% over a five-year period ending March 31, 2021—outpacing the average hedge fund's 5.6% return but substantially trailing the S&P 500's 16.3% gain and a 60/40 stock-bond allocation's 11.2% return. The disparity widened over a shorter horizon: during the 12-month period ending March 31, 2021, Elliott returned 14.8% while the S&P 500 surged 56.4% and the average hedge fund returned 23.8%.
Fee levels compound the performance challenge. Missouri State Employees' Retirement System documents reveal the fund paid approximately 4.9% annually in fees on its $193 million investment in Elliott International—substantially above the system's typical 2% fee allocation for alternatives portfolios overall. This fee drag materially reduces net-of-fees returns to investors, a critical concern for cost-conscious pension funds.
Beyond Elliott's own fund performance, the report identifies a secondary concern: Elliott's activist interventions appear to harm targeted companies' subsequent performance. The research documents that companies targeted by Elliott experience performance declines in the three-year period following the activist's involvement, suggesting that Elliott's activist strategy may create short-term pressure without generating sustainable value creation. Elliott Management did not respond to requests for comment on the findings.
The report, authored by the Communication Workers of America and the SOC Investment Group (affiliated with the Strategic Organizing Center), accuses Paul Singer's $48 billion firm of "significant underperformance" and warns pension funds and other large institutional investors to proceed with caution before committing capital. The timing and approach represent a tactical reversal: critics are now applying the same shareholder pressure and performance-based criticism that Elliott itself has long wielded against portfolio targets.
The performance data cited in the report reveals a consistent pattern of underperformance relative to simple, low-cost alternatives. According to pension documents from the Employees' Retirement System of the State of Rhode Island, Elliott Management gained 9.2% over a five-year period ending March 31, 2021—outpacing the average hedge fund's 5.6% return but substantially trailing the S&P 500's 16.3% gain and a 60/40 stock-bond allocation's 11.2% return. The disparity widened over a shorter horizon: during the 12-month period ending March 31, 2021, Elliott returned 14.8% while the S&P 500 surged 56.4% and the average hedge fund returned 23.8%.
Fee levels compound the performance challenge. Missouri State Employees' Retirement System documents reveal the fund paid approximately 4.9% annually in fees on its $193 million investment in Elliott International—substantially above the system's typical 2% fee allocation for alternatives portfolios overall. This fee drag materially reduces net-of-fees returns to investors, a critical concern for cost-conscious pension funds.
Beyond Elliott's own fund performance, the report identifies a secondary concern: Elliott's activist interventions appear to harm targeted companies' subsequent performance. The research documents that companies targeted by Elliott experience performance declines in the three-year period following the activist's involvement, suggesting that Elliott's activist strategy may create short-term pressure without generating sustainable value creation. Elliott Management did not respond to requests for comment on the findings.
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