Institutional Investor's Alpha Magazine - June 2008 - (Page 44)

ALPHA HALL OF FAME body really have? You’ve got to make a high-conviction bet when you feel like you have a great idea. That’s really the only way to outperform today. A decade ago you brought in a psychiatrist, Ari Kiev, to coach SAC traders. Has his role become less important as you’ve moved to more-fundamental investing? Asia. The game is changing. Stock markets are starting to develop all over the world, and that creates opportunity. Is the lack of information in new markets a problem? Ari is still an important part of the ﬁ rm. It was somewhat innovative at the time to bring in someone like him. Investing and trading is a mental game. There’s always something people can work on to improve what they do. Ari’s job is to try to help them identify that and get them thinking about how to do things better. Part of being successful in the markets is being in control of your emotions and making decisions for the right reasons, not the wrong reasons. And the more you can stay in touch with that and what’s going on in your head, then I think the more successful you can be. Can traders and investors get better over time? Those markets are more inefﬁcient. And consequently, you can probably do better over there in the sense that if you do good analysis, you probably create a better edge there than you can here. In a perfect world you would want to transplant some of your own people so that the culture sort of happens over there like it happens here. We try to do that. We’re pretty careful about putting people in places that we’re not sure about. We’re going to grow these businesses slowly and develop a good foundation. How would you describe the SAC culture? Entrepreneurial, collegial and independent-minded. We want people who are self-starters and people who know what they want to do and how to execute on their strategy. I tend to be a guy who gives people a lot of autonomy. I tend to believe in human nature. I also believe that if you give people enough rope and enough room, they’re going to create something that’s unique to them. I’ve learned as much from my people or more than they’ve learned from me. These young guys, they’re smart, they’re inquisitive, and they teach me stuff. How do you keep employees happy? Yes, I think so. But the real question is, Are they wired to adapt? The ones who can adapt are probably the ones who are going to end up being successful, because markets change. I think one of the reasons SAC has been successful over the years is because I’ve been very ﬂexible. Will SAC continue to evolve? Pay them well. I also think it helps that I give people a lot of autonomy. The vast majority of people who have come to this ﬁrm have had a really good experience. We usually don’t lose people to other ﬁrms. We tend to lose them if they start their own ﬁrms. So you’re going to have some turnover. That’s inevitable. I started my own ﬁrm, so I understand that. And that’s why I try to keep this ﬁrm well diversiﬁed, so when and if people leave, the ﬁrm just keeps going, which I think is the mark of an institution as opposed to just a one-hit wonder. Do you think the huge sums made by hedge fund managers are justiﬁed? I assume that the game is always changing, and we’ve got to keep adapting to what the markets allow. The world has changed a lot in the past five years. So if you had asked me ﬁve, six years ago, “Would you have an ofﬁce in Hong Kong?” the answer would have been, “I doubt it.” And now I do have one there. Have you been to China? I was there about three years ago, and I was just blown away by it. I could start to understand why certain industries and certain stocks have been acting the way they are. Of course, you can read about the growth that’s happening in China, but when you see it, it forces you to think about things differently. China is very far away from Connecticut. And you need to see it to understand it. How much does SAC invest outside the U.S.? I don’t think any of us got into this business thinking we would make the money we’ve ended up making. But that’s the American way. These are small businesses, and with the amount of hours that people put in to be successful, they ought to be applauded, not criticized. I’m not forcing anybody to invest with me. And the reality is, I have a lot of my own capital at risk in the ﬁrm. So if I make good investments, I ought to make a lot of money. And when I lose money, I’m losing my own money too. How does collecting art ﬁt into your life? Probably 15 to 20 percent of our activity is outside the U.S. There’s a lot of opportunity for growth in both Europe and 44 • INSTITUTIONAL INVESTOR’S ALPHA • JUNE 2008 On a Saturday, rather than play golf, I’ll go to a gallery and look at art. Art collecting brings in some of my skills as an investor — my ability to assess risk and ﬁgure out what something is worth. I’ve also learned a lot and gotten to know many people who I would never have met in the normal course of doing business. — Interview by Michael Peltz

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

Investor's Alpha Magazine - June 2008 Contents Letter From the Editor Longs & Shorts Cover Story: Alpha Hall of Fame Bruce Kovner Michael Steinhardt Kenneth Griffin Louis Bacon Steven Cohen George Soros James Simons Seth Klarman Julian Robertson Jr. Jack Nash Leon Levy Paul Tudor Jones II Alfred Winslow Jones David Swensen Looking Ahead: Back to the Future Research Center: Europe Hedge Fund 50 Unhedged: Let the Sunshine In

Institutional Investor's Alpha Magazine - June 2008

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