Julian Robertson Dies at 90 – Nasdaq Hedge Funds Lose Their Godfather.
Julian Robertson has built a dynasty of hedge fund managers.
Along with George Soros, the American Julian Robertson, who died on Tuesday 23 August 2022 at the age of 90, was one of the last “big cats” of hedge funds. His firm, Tiger, flourished during the golden age of hedge funds (1980-2000) and inspired some 40 traders, managers, and analysts, known as the “Tigers”. They worked alongside him and then launched their hedge funds. They all paid tribute to him.
“He was tougher on us when we were making money. He was quiet and almost benevolent when the markets were against us. All he had to do was look at the screen with our positions and calculate in an instant what our performance was,” says David Saunders of K2 Advisors.
With a pronounced taste for technology stocks, Tiger's alumni are still making the headlines on the Nasdaq today. Among those star managers, his spiritual son Chase Coleman of Tiger Global enjoyed phenomenal success before being caught up in the tech stock collapse in the first half of 2022.
“Julian was a pioneer and a giant in our industry, respected for his abilities and integrity. I will be eternally grateful to him,” the manager said.
24 hours per day
“When you're managing money, it's 24/7,” Julian Robertson reminded his staffers tempted by a short weekend getaway. “He attracted people by sheer force of personality. He met singer Paul Simon (of the duo Simon and Garfunkel) and, based on a shared passion for baseball, persuaded him to invest in Tiger. So did writer Tom Wolfe. Robertson knew how to use these stars to attract other investors,” says journalist Sebastian Mallaby in his book “More Money Than God”.
Born in North Carolina, this former naval officer began his career on Wall Street at the brokerage firm Kidder Peabody. At the age of 48, he launched his hedge fund, Tiger, with a capital of 8 million dollars. This period (1980) coincides with the beginning of a long bull market in stocks until the crash of 1987. It was also the beginning of the 401k plans launched in 1981, which allowed small investors to invest on Wall Street.
Tiger initially specialized in American stocks, with 100 to 200 companies in his portfolio depending on the year. He was particularly interested in small and medium-sized companies not followed by Wall Street brokers and firms. He also invested in Korea and Japan when they were not yet attracting the attention of large international investors.
As his fund grows, he invests in international equity markets and new asset classes such as commodities, bonds, and currencies. He follows the model of George Soros' Quantum Fund. Between 1980 and August 1998, the beginning of the Russian crisis, his hedge fund earned nearly 32% per year, almost three times the average return of American stocks (12.7% for the S&P 500 index).
Short selling
On Wall Street, he also tries to guess which companies will be the subject of a takeover bid, especially in sectors such as airlines. The 1980s were indeed marked by a wave of buyouts financed by debt, notably by private equity funds like KKR. The fund also practiced short selling, a technique that was not widely used at the time. It allowed Tiger to limit its losses, and even to make money when the markets were going badly. He sold short overvalued and mismanaged groups.
According to legend, he sold his investment in a company when he realized that its CEO was cheating on the Gulf, a very bad sign according to him for the group's accounts. While he encourages his teams to take initiative, he retains the final say on the investment. If the share is deemed to be profitable, he can hold it for several years. This is also the case for his macroeconomic bets.
When he has a strong conviction, he maintains it against the prevailing market opinion. In 1983, he started speculating on the decline of oil. He lost a lot of money at first, but after three years, the barrel had dropped by half its value. After the fall of the Berlin Wall, one of his managers, John Griffin - now the head of Blue Ridge - decided to invest in German companies - Deutsche Bank, Veba (utilities), and Felten & Guilleaume (electrical cables) - that could benefit from reunification.
He was one of the few to take such a gamble, as managers feared the impact (inflation, fall of the Deutschmark, etc.) of the reunification of the FRG (Federal Republic of Germany) and GDR (German Democratic Republic).
Dot-com bubble
When the Russian crisis started in August 1998, Tiger managed 22 billion dollars, as much as Soros, and on all the major markets. With this first alert, he lost 2 billion dollars in a few days due to the rise of the yen, a safe haven currency. Currencies had become one of the fund's favorite asset classes. Until now, they had been successful.
However, it was the Dot-com bubble that, two years later, caused the hedge fund to close. He bet too early, from 1999 to March 2000, on the bursting of the Nasdaq bubble. His fund devalued and Julian Robertson decided to stop his career almost the same day that the stocks started to plunge.
He did not leave the sector and invested his money, not in the markets but in other hedge funds. In particular to those who worked with him and then started their own business. He also invests in wine, farms (sheep), and golf in New Zealand, a country he has visited regularly since the 1970s.
According to the Wall Street Journal, he has donated nearly $2 billion to charity. His fortune, estimated at $4.7 billion by Forbes, is expected to be donated in part to charities and foundations. His three sons work in the family empire (foundations, properties in New Zealand, investment firm). It is Alexander who invests the family's money in other hedge funds.
Some reading
The Day George Soros Broke the Bank of England To Make $1.1B. A look back at a large-scale speculative attack led by the American billionaire in the early 90s.
The Strong Dollar Is a Danger to the World Economy, and It Has Already Taken Its First Victims. The dollar’s rise is probably not over.
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Borrowing Fiat Money to Buy Bitcoin ... Good or Bad Idea? Full analysis.