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tv   The David Rubenstein Show Peer to Peer Conversations  Bloomberg  April 14, 2018 1:00pm-1:30pm EDT

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>> what was the strategy that you used? >> i was determined to recapture my parents' money, but i was lost. it was first come first serve. >> you have the image of being a person who strikes fear in ceos. some people are probably afraid they will get a call from paul singer. >> it doesn't bother me anymore. >> if someone had invested in you in the beginning, what rate of return with a have? become $160. would people would recognize me if my tie was fixed. let's leave it this way. all right.
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>> i don't consider myself a journalist. nobody else would consider myself a journalist. i began to take on the life of being an interviewer even though i have a day job of running a private equity firm. >> how to find leadership? >> what is it that makes somebody tick? day that you other open your fund for 24 hours, and $5 billion showed up. how does someone race that in 24 hours? >> it wasn't exactly true. it is true that once the offering was opened, because it was first-come first-served, there was a lot of demand. 23 hours later, it was filled up. but it took a number of months of preparation. david: that makes me feel
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better, that you didn't do it in just 24 hours. how much do you manage overall now? >> i think $34 billion overall. >> you started your fund in what year? >> 1977. from friends and family. i was a practicing lawyer. in early 1977, i decided that what i had been doing men -- what i had been doing, managing a tiny amount of friends and family, money was more interesting than managing law. >> you went to university of rochester, and then part of law school. was a daunting experience, especially because i didn't exactly like what i was doing. david: but you want to practice law in new york. paul: in the absence of a better idea. david: i practiced law in new
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york and in washington. when i give up the practice of law to go into business, my mother said, eight you don't know anything about business -- what did your mother say? paul: can you earn a living? david: so you started, worked out of your apartment. you had $1.5 million from friends and family. what was the strategy you used to get out of the ground? paul: a tiny bit of context. my dad was a retail pharmacist. after i started attending law school, he said you have to learn how to be an investor. he and i traded tiny amounts of tech stocks and mining stocks together, $2000 of this or $5,000 of this. so i became very interested in markets and trading, and in the 1967-eight to 1974, he
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and i found just about every possible way conceivable to lose money. so when i started elliott in 1977, i was determined to engage in a trading strategy that made money all the time. so for the first 10 years or so of elliott's existence, the primary strategy was convertible bond hedging. by the bond, short of the stock. it had a strong kerry and trading profits. i practiced it on low leverage and it did a good job. a consistent return making money more or less all the time. david: when did you realize you were better than the average guy doing these kind of things? paul: and never thought of it that way. i was completely determined to ,ust make a rate of return really recapture my parents' money that i had lost previously
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. to pursue thatys goal at a time when convertibles were becoming more quantified, leveraged, and competitive. what you do,re of you call it a macro fund or a value fund. what would you describe your investment technique? paul: some people would call it multi-strategy, others would call it absolute return. the idea of our portfolio mix is to make money as close as possible to all the time. what we have done in pursuit of that goal over the years, as vanilla convertible hedging ddcame uninteresting, was a other ways of adding absolute return to the mix. part of it was my experience as , but manual activities,
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trading manual effort for risk anda good way to add value also control this. that is why bankruptcy, distressed securities became the largest capital employment. that is why in recent years, equity activism has become a very important capital deployment. david: that is an important part of what you do now, equity activism. there are a couple that are well known. one that is famous all over the world appeared you bought bonds from argentina. you may read this. -- you make remember this. you ultimately reached a settlement that was favorable to your investors. was it hard to hold on that long? onl: it was not hard to hold a portfolio cents. at no time until the current
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government came into office, i believe in december 2015, at no time before that did the previous two governments negotiate with us. , the stubbornness or motivations of your adversary cause you to not be able to make a deal. becomes potentially a larger recovery. david: do any of your investigators -- your investors say, paul, you've made a decent amount of money. interestingly, no. even when it has gotten press -- and it was not an easy situation. it was not only 14 or 15 years holding this thing. it was contentious. david: so you didn't worry if someone was going to physically attack you from argentina? paul: this isn't the place to
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talk about security arrangements. but it was a contentious situation. david: if someone had invested with you in the beginning and kept their money with you since the beginning, i don't know if anyone did that, what kind of rate of return what they have over 40 years? paul: my mom did that. david: she's 99 years old? 99+. david: i assume she's proud of you. i assume paul: yes, she is. from the beginning, a 13 .5% net compounded rate of return, one dollar became $165. and there were some early investors that had stayed in basically all the time. david: over 40 years, you compounded 13.5% net for 40 years. is it too late to invest retroactively? david: you have an image thing,
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of a person who strikes fear in ceos. you must recognize some people might be afraid they could get a call from paul singer. when at is good with -- corporate executive understands we are real and have the capacity to carry through on the projects we undertake, and that we need to be convinced. ♪
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>> today, you take corporate or government bonds and you are willing to litigate. paul: litigation is always a last resort. in a situation which is a dispute about seniority or claim, it is part of the equation. one of the risk-limiting and value creation strategies is on
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correlation -- uncorrellation. add to an absolute return seeking portfolio. if you do something that has a pattern of risk and return, even if it is volatile or binary, make a lot/lose a lot, but the returns that has nothing to do with the course of the stock or bond markets or anything else in your portfolio, that is an elegant part of the mix. ford: you ever do research a company, and someone calls up the ceo and says -- do this and that, they say, that is a good idea, i wish i thought of that? paul: is interesting, the way you are asking the question, it presupposes the response of the company is always either anger or hiding under their desks or some combination. david: and that is wrong, you
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are saying? paul: sometimes you are knocking on an open door. my style and your style as a is doing the work as thoroughly as we can to develop a thesis. to assess whether there really is a action or series of actions that can be taken to eliminate underperformance or a malia rate a situation. ameliorate a situation. generate a dialogue. sometimes you find you are knocking on an open door. sometimes there is a founder or a management team who is ready to sell out or happy to go on to something else, but they don't want to feel they are deserting their staff, their employees. there's a lot of different reasons the company that is
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ready for some kind of reformation for new blood likes to see a resolution that can maximize value. david: how many investment professionals do you now have in your firm? paul: hundred 20. co-ceo and co-cio named john pollock who has been with me since 1989. , we more than complete each other's sentences. the impulse of the hedge fund thinkingndependent of -- independence of thinking. folks earliest hedge fund were by themselves, privateers of the world's investment oceans. craft wouldght the
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be susceptible to an organizational approach, a team approach. i actually never thought i would be a good manager and team leader. the way it actually works is a layered process by which we attempt to train people to accept responsibility, deliver trustworthy insights, inputs. to have done the work or commissioned the work. approve or i generally every meaningful position and certainly every deep discussion about large positions. david: you have an image of being a person who strikes fear in ceo's. you must recognize people may be afraid they could get a call from pulsing her. does that image bother you? -- get a call from paul singer? paul: i've learned to not care
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too much about press. it is good when a corporate executive listens with the understanding that we are real. that we have the capacity to carry through, and a history of carrying through on the projects we undertake, and that we need to be convinced in order to say, ok, sorry. which sometimes we do. sorry, we were wrong. or doing a great job. it doesn't bother me anymore. david: how you see the economy right now? paul: i'm concerned about where we are in terms of the financial system with the economy, american and global economy. after nine years of what i considered to be a distorted set of policies, completely oriented towards what i regard as monetary extremism, combined
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with what i consider growth-suppressive fiscal policies. regulatory tax. i think it has created or distorted recovery. it has been partially responsible for this augmentation, exacerbation of inequality that has caused the combination of that and the incomplete recovery has caused this middle-class stress and edginess around the world that fringe to some political parties and fringe thoughts, populism. after nine years of this part ofal -- on the financial assets, high-end real estate and art. we have today is a global financial system that is about as leveraged, and in many cases
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more leveraged than before 2008. and i don't think the financial system is more sound or that the fixes that have been put in place have actually created a sound financial system. i don't believe that confidence is justified in policymakers and central bankers, and the fact that confidence has not been obvious,ntil now is but if and when confidence is lost, i think it could be lost in a very abrupt fashion, causing conceivably a ruckus in the bond market and stock --kets and in the financial david: you've raised a lot of money for republicans. do they listen to you? >> their problem is they are
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subject to all kinds of forces, pressures coming from 360 degrees on their compasses. so the right policies and best ideas are not necessarily the things that make the final cut. ♪
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david: in the -- world, you have become well known in the republican party. who was your favorite candidate in the last election? decide for most of 2015 -- and then supported marco rubio. when he dropped out, did you have anybody next? paul: no, i still decide. ultimately, when donald trump was the nominee, did you support him? paul: i voted for him. i was not going to vote for hillary clinton, as some of my republican friends did. and i became optimistic about some of the opportunities in economic growth and regulatory
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reform. has donald trump invited you to visit him? did you know him before he was president? >> i invested in his bonds a couple of times. >> those are high-grade bonds? >> they were on the date of issue. [laughter] david: high-yield? paul: and below. david: have you seen him since he was president, and have you given him any advice? paul: i visited the white house once a few months ago and we chatted about taxes and economic policy. david: you've raised a lot of money for republicans. do they listen to you? thank you for your ideas, by the way i'm having a fundraiser? paul: that is not the way it goes. -- let's bem humanists here. their problem is that they are
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.ubject to all kinds of forces all kinds of pressures coming from 360 degrees on their compasses. so the right policies, best necessarily -- and many of them listen and many are smart. they are not necessarily they don't necessarily make the final cut. i think it is necessary for inform citizens to try to give assistance. republicang activists who actually can, in a ,elatively on conflicted level we have less parochial interests in the things we talked to policymakers about than most folks. david: you have made a fair amount of money and have been involved in philanthropy. one of the areas you've been
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involved with has been human rights. what propelled you to get involved with human rights and marriage equality issues? philanthropy to of same spirit of activism trying to get involved, make a difference and impact, create things not just write out a check. is the similar impulse impulse is that governs my investing style. rights, my of gay younger son came out to me as gay in 1998 when he was 21. after some brief discussions, i became very being a funder of gay rights groups, of helping out in that realm. in the beginning, just writing
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out checks. pursuant to agreement with my son, anonymously, but over time it became overt. and over time, i and my team became quite friendly with legacy gay-rights groups, democrats. hard-core democrats. and we started working together on different projects. -- culmination of that was highlywas really a very strategic and well executed project. it was a partnership with the governor of new york, with us and our democratic friends, to make gay marriage legal in new republican required
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state senators' help. david: when you are not investing or giving away money, you must have some time for relaxation. what gives you pleasure outside of those other activities? david: i'm a musician. i play piano and keyboards. home?in concerts, at do you have a band? david: i've been in a number of amateur bands. and i played with musicians. david: just because you took lessons when you were young? or did you learn this late in life? paul: i started taking piano lessons when i was 10 years old and started becoming interested in playing rock and blues and when i was 11ano years old. i've been in reggae bands, blues bands, rock bands.
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i've had a lot of fun because most of my family are musicians. we have a family band also. a guitar player, saxophone player, drummer. what would you like to see is the headline of what you accomplished in life? paul: he tried to make a difference, he protected a lot of people's capital over a long time. he was steady, reliable. david: i think that is pretty good. a lot of people who are very wealthy, i've noticed, are not very happy. you seem like a pretty happy person. happy? this is a form of therapy. you mind if i lie down? david: you have done an incredible job of building a which i admire. i want to thank you for a great conversation. ♪
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>> europe's next big deadline. the general dates of protection regulation, gdpr. will it be?ant how compliance is seen in the first quarter since the law went live. the -- goes live again. how many changes will be made in congress? welcome to bloomberg markets rules and returns. is the showturns where we


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