Breakingviews – Elliott’s HK exit reflects Asia activist reality

Paul Singer, founder and president of Elliott Management Corporation, speaks at WSJD Live conference in Laguna Beach, California, U.S., October 25, 2016. REUTERS/Mike Blake

HONG KONG (Reuters Breakingviews) – Hedge funds are prized for a cold-hearted ability to follow the money. U.S.-based Elliott Management’s decision to close its Hong Kong office has caused a stir in light of the city’s political tensions, exacerbated by Beijing’s imposition of a sweeping national security law in July. Yet an activist wave across Asia in recent years has largely passed by China and its offshore fundraising hub. That’s a good reason to concentrate resources where they can matter.

The 44-year-old fund led by Paul Singer will run its Asian investments from Tokyo and London in the future, Reuters reported citing sources. Elliott’s Hong Kong base had been without a head since 2018 and staff numbers had dwindled to some 20 from about 40 when former boss James Smith moved back to London that year with some of his senior team.

In Hong Kong Elliott is best known for a six-year-long ongoing campaign to shake up $6 billion Bank of East Asia, a family-controlled lender whose shares have halved in that time. The fund declared a partial victory last year when the bank put a division up for sale but the battle to extract value is still a work in progress.

More importantly, the focus of activism in Asia has shifted. There were 66 public activist campaigns in Japan last year, according to data provider Insightia, of which one was Elliott’s efforts to shake up tech conglomerate SoftBank, which helped produce more than $40 billion in asset sales. There were just 17 public campaigns in all of China and Hong Kong combined. The Japanese number has risen nearly threefold in five years while those in Greater China have dropped by a third.

China’s concentrated shareholdings and corporate culture that shuns criticism doesn’t suit the usually public efforts of Elliott and other activists. Hong Kong’s national security law has coloured all conversations about Asian staffing and locations since its introduction. The fund manager’s exit will add to a longer-term debate about the value of keeping regional hubs in the city but it’s easy enough to justify it in financial terms alone.

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source: reuters.com