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EFFORT-LADEN MANUAL ACTIVITIES

He focuses on process-driven activities where he can add value. For example, with distressed securities, he is a hands-on activist trader who gets involved in negotiations and committee work; he is close to the companies. An example is where the value of the business may not be the main uncertainty but perhaps a legal decision is key to the rate of return or return on profit. The hands-on activity also is evident in arbitrage strategies. For example, with investment trust arbitrage, he observes, "We don't trade just relationships; we try to make things happen."

Singer likens what the firm does to what private equity managers do but with smaller positions. Whereas a private equity manager may have 10 positions, private equity-like investments could represent 1 percent of Elliott's diversified portfolio.

The characteristic that makes Elliott Associates different from many other managers in similar businesses is that they apply more resources to the task—they work harder. There is a higher unit of effort to money invested, and more complexity per unit of risk. He focuses on those areas that are effort-laden—where manual effort is required. Unlike some other managers, Elliott is usually not just buying cheap stock in bankruptcy. It takes a one-on-one approach to one-off situations.

Singer adds that they have quant cleverness skills but are not a quant shop. Many of their trades have arbitrage, quantitative, and derivative elements but those are just part of the equation. "We also know the company, are close to the companies, have done the work, and know the numbers." In other words, their approach combines qualitative and quantitative skills; both are critical elements.

Singer doesn't like to use the term "edge" since he is not competing against anyone. He is trying to get it right. "Compared with stock pickers and value players, destiny is in our own hands. It is based on the quality of work and the quality of decisions—it is about getting it right."

THE TEAM

There are about 60 people in the New York and London offices. Senior portfolio managers are responsible for the different sectors, industries,