Billionaire hedge-fund manager Paul Singer said derivatives have been a “net negative” for society and that the touted hedging benefits have been overstated by financial companies.
“I love trading them,” Singer, whose Elliott Management Corp. manages $23.9 billion, said during a panel discussion at the World Economic Forum in Davos, Switzerland, today. “On balance, there’s been a net negative to society from this particular type of invention.”
While banks say that derivatives allow companies in industries from energy to agriculture to hedge their risks, the resulting increase in leverage and complexity to balance sheets hasn’t been worth it, said Singer, 69. He also said that the banking industry remains too dangerous to global stability five years after the financial crisis.
Singer’s New York-based hedge fund rose 12 percent last year, according to a performance report obtained by Bloomberg News.