Institutional Investor's Alpha Magazine - April 2008 - (Page 38)

Top 50 Moneymakers is trying a similar tack with newspaper giant Media General. He is also moving in on Asarco, a mining company in distress, and has raised his stake in struggling utility company Calpine Corp. His most recent deal: Falcone paid $49 million for the 27-room Manhattan townhouse that once belonged to Penthouse publisher Bob Guccione. 5 Kenneth Grifﬁn Citadel Investment Group $1.5 BILLION 7 Timothy Barakett Atticus Capital $750 MILLION Tiger, Tiger, Burning Bright hen Julian Robertson Jr. shuttered his hedge fund operation, Tiger Management Corp., in March 2000 — after his once $22 billion in assets had dropped about 40 percent in a little more than two years — some onlookers wondered if the master had lost his touch. He hadn’t. Last year the 75-year-old Robertson had a 75 percent return on a multibillion-dollar portfolio he personally manages for himself. And the 28 funds he has seeded since Tiger closed have generated an average return of 56 percent before fees. By Alpha estimates, Robertson made more than $1 billion in 2007. But he doesn’t qualify for our list of top hedge fund earners because he doesn’t have outside investors. His smartest investment was the result of a hedge he executed several years ago on credit default swaps. “It didn’t cost anything,” Robertson says, adding that it provided his biggest gain last year when the subprime mortgage market collapsed. These days, his big wagers are on derivatives known as “steepeners,” essentially bets that the yield curve — the spread between short- and long-term bond yields — will widen further. “My feeling is, for the Fed to get out of this mess, it must keep short-term rates low,” Robertson asserts. He says he has a sneaky suspicion short-term rates will either stay where they are or fall some more. He expects long-term rates to rise because of increasing inﬂation and the weakening dollar. “Foreigners won’t want the long-term stuff,” Robertson warns. Though the U.S. stock market has shown some signs of recovery in recent weeks, Robertson has not been a buyer. “I don’t think it is that interesting,” he says. He remains bullish on China, usually through venture capital and private equity funds. As for the 28 hedge funds he has seeded since closing Tiger’s doors to outside money, Robertson says that collectively they manage $30 billion. Among them are two on this year’s list of top earners: Charles (Chase) Payson Coleman III (tied at No. 18) and Bill Hwang (tied at No. 38). The group of Tiger “cubs” on the list — former Tiger analysts who worked under Robertson during the ﬁrm’s heyday — also includes Stephen Mandel Jr. (No. 8), John Grifﬁn (No. 9), O. Andreas Halvorsen (No. 10), Chris Shumway (tied for No. 18), Paul Touradji (No. 37) and Lee Ainslie III (tied for No 44). Is Robertson having more fun these days not having to deal with outside clients? “For my time in life, it’s the way to do it,” he says. “If you are running someone else’s money, you feel a much bigger responsibility than running your own.” — S.T. W Ken Grifﬁn, 40, is on an extended roll, logging his second straight year of 30 percent returns, mostly from equities and quantitative strategies. Total hedge fund assets for his Chicago-based Citadel rose to $20 billion from $13.4 billion the year before. The company itself has grown along with Grifﬁn’s bank account, employing 1,200 people in seven ofﬁces. Last spring Grifﬁn launched Citadel Solutions, which provides hedge fund administration services. In February of this year, the subsidiary rolled out a hedge fund trading platform for Bloomberg subscribers. Also this year, in a market expansion move, Citadel split off Citadel Derivatives Group, a market maker in equity securities and listed options, from its hedge fund business. In late 2007 a group led by Citadel put $2.55 billion into struggling E*Trade Financial Corp., the U.S.’s fourth-largest discount brokerage. And Citadel looks well positioned to take advantage of the credit crisis: It took over Sowood Capital Management’s credit portfolio last summer after the Boston-based hedge fund ﬁrm fell apart, and in March 2007 it bought bankrupt subprime mortgage lender ResMAE Mortgage Corp. Tim Barakett has not-so-quietly built the world’s biggest activist hedge fund ﬁrm. In the three years since he teamed up with Christopher Hohn and the Children’s Investment Fund (UK) to thwart Deutsche Börse’s attempt to buy the London Stock Exchange, Atticus Capital’s assets have swelled ﬁvefold, to $20 billion, on annual returns of about 27 percent for the Atticus European and Atticus Global Advisors funds. Last year was more of the same, as Barakett, 42, made good on big positions in metals, mining and ﬁnance. Some Atticus investors were irked when on April 1 of this year the ﬁrm put 20 percent of the two funds into “side pocket” holdings in Deutsche Börse, but it seemed merely a sign of long-term commitment, not a defensive move. Barakett, who started New York–based Atticus in 1995 when he was 29, is a former Harvard University hockey teammate of fourth-ranked Philip Falcone. Two of his fellow Atticus managers (read on) make the list this year. 8 Stephen Mandel Jr. Lone Pine Capital $710 MILLION 6 Steven Cohen SAC Capital Advisors $900 MILLION Stevie Cohen’s 13 percent net return for 2007 was his worst in about ﬁve years, but his annualized returns still exceed 40 percent even after his 43 percent performance fee. The comparatively subpar showing by SAC Capital didn’t prevent Cohen, 51, from lifting his ﬁrm’s assets to $16 billion, nearly double what it had two years ago. Cohen, an avid art collector (remember the shark in formaldehyde?), fashions himself as multistrategy: long-short equity, quantitative, ﬁxed income and credit, macro, convertible bonds and emerging markets. The Stamford, Connecticut–based ﬁrm, launched in 1992 with nine employees, has more than 800 today. Stephen Mandel Jr., 52, one of the top stock pickers of all time and a former managing director at Julian Robertson Jr.’s Tiger Management, made shrewd overseas bets last year in France, Germany, Hong Kong, India, South Korea, Switzerland and the U.K. The former Tiger “cub” (one of six Robertson protégés on this list) did just as well on short picks in the U.S., especially in retail and consumer ﬁnance, though he came a little late to the subprime ball. With $12 billion in assets, the Greenwich, Connecticut– based Lone Pine’s long-short funds grossed 57 percent. 9 John Grifﬁn Blue Ridge Capital $625 MILLION John Grifﬁn, another Tiger cub who excels at stock picking, delivered a 65 percent net return last year on his 38 • INSTITUTIONAL INVESTOR’S ALPHA • APRIL 2008 Illustrations by Harry Campbell for Alpha

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - April 2008

Institutional Investor's Alpha Magazine - April 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Here to Eternity The Good Guys: Voice of Hope Cover Story: The Kings of Cash Where the Money Is Into the Light Interview: Proceeding with Caution Strategies: A Convenient Truth Alpha Bytes: Village Voice Unhedged: Commentary: No Time for Complacency

Institutional Investor's Alpha Magazine - April 2008

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