Hedge fund manager Elliott Management Corp. on Tuesday dropped its court case against trade publication Absolute Return + Alpha, bringing to a close a battle over public disclosure of a hedge fund's investments.

Elliott withdrew its court petition seeking discovery about who leaked Elliott's investor letter to the publication just two days before the trade magazine was due to submit an affidavit to the New York State court in Manhattan. The magazine published its article Thursday despite the pending court case.

Elliott, which argued last week that disclosure of its positions in the investor letter would harm Elliott and damage its competitive position, said, "developments since the application was filed made the discovery unnecessary."

Elliott's spokesman didn't specify what those developments were.

A court hearing originally scheduled to be heard Sept. 9 is canceled now that Elliott has dropped the case.

The petition was watched closely by both the hedge-fund industry and the media because it was an unprecedented attempt to curb the public disclosure of trading positions stated in investor letters. Fund managers consider investor letters to be proprietary intellectual property.

But the case faced an extremely high hurdle in New York's shield law, which protects journalists from disclosing the identities of their sources.

"This was a blatant attempt to bully us and it backfired," the magazine's editor, Michelle Celarier, said in a statement posted on the publication's website Tuesday. "While trying to intimidate us into not publishing the story, Elliott did a disservice to itself."

In its story last week, Absolute Return + Alpha said Elliott's fund gained 5.3% in the six months ended June 30, outperforming the S&P 500, which declined by 6.6% during the period.

It also cited the hedge fund manager's 26-page investor letter as saying that Elliott profited in the second quarter from debt and convertible investments, but lost on distressed securities in Lehman Brothers Holdings Inc., General Growth Properties Inc. (GGP), and Washington Mutual Inc. It added it suffered losses from event arbitrage trades on Pacific Century Premium Development Ltd. (PCFPF, 0432.HK) and Epicor Software Corp. (EPIC), the publication said.

Another hedge fund manager, who declined to be named, said exposing Elliott's losing positions allows other market participants to anticipate a sale in the companies involved and could give Elliott an unfavorable price in transactions, especially those in the opaque convertible bond market.

Elliott declined to comment on Absolute Return + Alpha's comment.

-By Amy Or, Dow Jones Newswires; +1 212 416 3142; amy.or@dowjones.com
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