Billionaire Julian Robertson dies at 90 – Contrarian investing led his pioneering hedge fund

Julian Robertson, who built one of the most successful hedge funds of the late 20th century and later founded many of his protégés’ firms, died Tuesday of heart complications at age 90.

After a “controlled aggression” style, how Forbes described in a 1990 story, Robertson’s Tiger Management outperformed peers like George Soros and Michael Steinhardt for years by finding undervalued stocks, buying into “forgotten markets” and short-selling industries where Robertson was bearish, often going against conventional wisdom. His Tiger Management returned 32% annually from its inception in 1980 to 1998, and assets peaked at $22 billion before a misguided short bet against the Japanese yen led to a wave of withdrawals.

Robertson closed the firm in 2000 and created some of today’s most visible and successful hedge funds, known as Tiger Cubs, including Chase Coleman’s Tiger Global, Philippe Laffont’s Coatue Management and Stephen Mandel’s Lone Pine Capital. Forbes recently estimated his fortune at $4.7 billion. He first appeared on our Forbes 400 list of the richest Americans in 1997.

“Hedge funds are the antithesis of baseball,” Robertson said Forbes in 2013. “In baseball you can hit 40 home runs on an A-league team and never get paid. But in a hedge fund you get paid at your stroke average. So you go to the worst league you can find, where there’s less competition.”

Excluding his wealthy clients, which over the years included author Tom Wolfe and singer Paul Simon, Robertson’s Tiger Management created no fewer than six billionaires among hedge fund managers. A prominent Tigers alum, Bill Hwang, amassed a $35 billion fortune at Archegos Capital Management before it collapsed in a matter of days in 2021. He now faces 11 charges related to market manipulation.

Starting a hedge fund was a second career for Robertson, a native of Salisbury, North Carolina, who graduated from the University of North Carolina at Chapel Hill. He spent two years serving in the Navy and then 21 years at the former white-shoe investment bank Kidder Peabody, starting as a stockbroker and rising to head of its investment subsidiary. In 1978, he took his then-wife and two young children on a yearlong vacation to New Zealand, where he wrote an autobiographical novel he never published about a young southerner in New York City.

“I think I write pretty well, but I learned during that year that I’m not a novelist by any stretch of the imagination,” Robertson said. Forbes in 2012, though he retained a lifelong love of New Zealand and operated several resorts and golf courses there.

Back in the U.S. and reinvigorated, Robertson spurned the administrative work and declining stockbroking commissions and tried his hand at a new type of firm called a hedge fund at age 48. He and his partner Thorpe McKenzie started Tiger Management in 1980 with $8.8 million. including $1.5 million which constituted essentially all of their available capital.

“I like to compete — against the market and against other people,” Robertson said Forbes during Tiger’s heyday in the 1990s.

His success made him one of Wall Street’s wealthiest and most respected minds, though he never shed his Southern drawl, and he was a generous philanthropist, giving more than $1.5 billion to causes such as medical research and environmental protection. His gift of $24 million in 2000 created the Robertson Scholars program, which gives students at his alma mater UNC and its neighboring rival, Duke, full rides and encourages collaboration between the two schools.

In his later years, Robertson said he might choose a different career path if he grew up now.

“People ask why hedge funds aren’t doing better — I think it’s from increased competition from other hedge funds,” he said as one of the 100 Greatest Business Minds Alive presented to Forbes’ 100th anniversary in 2017. “If I were to start now, I would look at how the competition is in different areas – and then consider some that are not as popular.”

In the 1980s, Robertson’s methods were fantastic. Below is the first article Forbes published in Robertson, part of an April 1985 cover story entitled “Short-Sellers: What Meat They Feed.” There was a time when stock portfolios containing long and short positions and performance fees of 20% were new and controversial.

Roar of the Tiger

By Matt Schifrin

HHedge fund manager Julian Robertson hates cats because they kill birds, but dogs are something else. “I love dogs,” says Robertson, who runs two New York-based hedge funds. For possession? No, for short sale.

He means stocks like Tandem Computers, Newpark Resources Pizza Time Theater and Petro-Lewis, which helped it gain 25% in last year’s dismal market.

“There are tremendous opportunities on the short side,” says Robertson, who, despite his dislike of cats, calls his funds Tiger and Jaguar – perhaps a case of his dislike of the cat breed being overcome by his admiration. for their abilities. He keeps the couple well fed. Started in 1980 with $10 million, Tiger and Jaguar now have $160 million in capital and have provided such lucky partners as singer Paul Simon and author Tom Wolfe net returns averaging 40% per year. Not sustainable, perhaps, but still enjoyable.

A true hedger, Robertson works both sides of the market, the short and the long. He uses the same techniques in both. “Julian is not a gunslinger like the other hedge fund guys,” says Eliot Fried, Shearson Lehman Brothers’ chief investment officer. “Tiger doesn’t invest and then investigate.”

Instead, Tiger treats all of its 160 positions — long and short — as long-term investments. (Jaguar, smaller, with mostly foreign partners, is more nimble.) Tiger is still trimming damaged oil service reserves after nearly two years. It is also sitting on big losses (“several million dollars”) in the shorts of generic drug firms. “I still stand,” says Robertson.

Climbing sometimes means getting stuck. Confessed Robertson: “I shorted Dean Witter in August of 1981 at age 29 because I was worthless in stock brokerage. Sears took over Dean Witter. Tiger had to fold at age 48 and lost over $250,000. ” Sometimes he is right for the wrong reason. “Once I went through Babcock & Wilcox because I was bullish on nuclear power. Along came McDermott to buy B&W, and I did a package.” He stops and smiles. “I ended up being right on Witter and wrong on B&W, but I made money where I was wrong and lost money where I was right. You have to have a sense of humor in this business.”

Robertson’s only other job was with Kidder Peabody – 22 years, first as a broker and later as chairman of its investment subsidiary, Webster Management. After years of barely beating the market, Robertson left to start Tiger. He analyzed his mediocre results and concluded that he had spent too much time on administrative tasks and was too limited by institutional constraints. “We weren’t managing the money,” he says. “Now we do it all day and it’s fun.”

But it’s not all fun and games for the Tiger crew. Robertson expects intensive fundamental analysis for each position. If none of Tiger’s four portfolio managers can handle the job, Tiger hires consultants to help with the analysis. On the payroll have been an executive from a major insurance company, a doctor and an aviation specialist.

Lately, Tiger has been going after medical technology firms. Robertson admits he’s not a medical expert, so Tiger’s medical consultant, MD-MBA John Nicholson, helps the firm find potential shorts and longs.

As with other hedge funds, Tiger’s crew is paid handsomely when profits come in and not at all when they don’t. Robertson and his three sons have the largest stakes in the partnerships, with close to 13% of the $160 million capital. Also, as a general partner, his share of profits is 20%, about $5 million last year. (However, if the funds are several years short, Robertson doesn’t get paid until the fund grows to the last point at which he withdrew from earnings.)

Robertson says about 30% of his 20% share goes to paying portfolio managers. The rest is gravy. A sliding management fee of around 0.8% of assets pays for general and reserve staff.

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