Elliott Management Corp. built a $44.2 million position in JPMorgan Chase & Co. (JPM) during the first quarter even as the hedge-fund company’s founder said it was impossible to determine how risky financial institutions are.
The stake was part of an option-related volatility trading position that Elliott no longer owns and wasn’t a bet on the bank itself, according to a person familiar with the strategy who asked for anonymity because he wasn’t authorized to comment.
JPMorgan, the biggest U.S. bank by assets, was Elliott Management’s second-biggest new purchase by market value during the three months ended March 31, according to a regulatory filing today. The hedge-fund company bought 931,069 shares of New York-based JPMorgan, according to the filing. The biggest new buy was 2.88 million shares of Virgin Media Inc. (VMED) valued at $141.2 million.
Paul Singer, Elliott’s billionaire president, provoked a testy response from Jamie Dimon, JPMorgan’s chairman and chief executive officer, when he criticized the opacity and leverage in the global financial system as the two participated in a panel discussion about banking regulation at the World Economic Forum in Davos, Switzerland, during late January.
“One doesn’t know from disclosures, and one can’t find out from disclosures, whether each of the very large global financial institutions are actually risky or sound,” Singer said at the panel, which was broadcast on CNBC. Dimon, 57, responded by describing some of the bank’s disclosures and telling Singer that “hedge funds are pretty opaque, too.”
JPMorgan has gained 16 percent so far this year, in line with the performance of the Standard & Poor’s 500 Index and the Dow Jones Industrial Average, of which JPMorgan is one of 30 components.
Singer also advocated separating trading businesses from banks funded with federally guaranteed deposits as “extremely useful in normalizing the financial system.” Dimon, whose bank had $1.2 trillion of deposits at the end of March as well as Wall Street’s biggest trading business by revenue, has said that big, diverse banks like JPMorgan help the economy grow and can be sources of financial stability.
At an investor conference in New York last week, Singer made it clear that his views on banks haven’t changed since he spoke in January.
“Four and a half years after the crisis, banks are opaque,” Singer said on May 8 at the Sohn Investment Conference. “The financial system is highly leveraged and opaque.”
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