Institutional Investor's Alpha Magazine - June 2008 - (Page 59)

JULIAN ROBERTSON JR. ALPHA HALL OF FAME ulian Robertson Jr. founded Tiger Management Corp. in 1980 with $8 million, and by 1998 — Tiger’s peak — he ran $22 billion in assets, challenging fellow Hall of Famer George Soros for the title of world’s largest hedge fund manager. Robertson, known for keeping a ﬁrm hand on the tiller, had logged compounded annualized returns of 25 percent when Tiger closed its doors to outside money in 2000. During the ﬁrm’s wild ride, his was one of the most public faces of a wave of high-paid managers. He is also probably the greatest mentor the industry has known. Tiger fostered numerous “cubs” who went on to found their own, often overperforming, funds after working as analysts at the ﬁrm. Nine of the world’s 50 highest-earning hedge fund managers in 2007 had either worked for Robertson or were seeded by him, and seven of the 100 biggest hedge fund ﬁrms today are run by Tiger cubs. What skills have served you best? “I have a pretty good feel of risk versus reward. That’s the basic ingredient for successful investing.” JULIAN ROBERTSON What has been your biggest inﬂuence on the cubs? Photographed by Martin Adolfsson for Alpha on May 14, 2008, in New York. The thing I’m most proud of is the Tiger Foundation. We tried to make philanthropists out of talented money managers, and it has succeeded beyond our wildest dreams. For one of the few times in my life, I did not micromanage. I stayed out of it, and it worked fabulously. What did you teach the Tiger cubs to make them excel? I’d rather you ask them. Stephen Mandel Jr., founder of Lone Pine Capital and former Tiger retail analyst (1990–’97): “Julian, above all else, impressed upon me the importance of understanding people — the abilities, track records, ethics and character of management, particularly the CEO — not only forming our own impressions, but checking out management through our network and former colleagues and others in the same industry.” Chris Shumway, founder of Shumway Capital Partners and former Tiger managing director (1992–’99): “I learned many things from Julian, but two things resonate: First, the process of identifying, mentoring and developing talented young people. When hiring, focus on someone who is competitive, team focused and has the courage of his convictions. Second, Julian instilled in us the importance of philanthropy, giving back to the community and encouraging others to do so as well.” Paul Touradji, founder of Touradji Capital Management and former commodities manager at Tiger (1996–2000): “Julian taught us three key things. One, dig, dig and dig deeper. You quickly learned that what you thought was 100 percent of the work was [only] 20 percent of what was needed. Two, the value of a world-class information network. Julian had an unbelievable Rolodex. The third thing was the importance of management. Bad management with good assets can fritter away value.” — Interviews by Stephen Taub JUNE 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 59 I have a pretty good feel of risk versus reward. That’s the basic ingredient for successful investing. When I ﬁ rst started out, I was a cheapskate looking for dirt-cheap stocks. When I got so many talented analysts, I realized it was better to go for more expensive growth stocks because the analysts could project earnings well into the future. If you have high assured growth, the price-to-earnings multiple really has to be out of sight for you to be taking much risk. Not many managers change their investment style. I don’t think I did. I think I wised up a bit and realized it wasn’t just price that created value. If you can buy a stock at 25 times earnings that you are sure will grow at 20 percent for a long period of time, it is a better value than a stock trading at seven times earnings that is going to grow at 3 to 5 percent. The investor makes money on both the multiple and the growth in earnings. What’s the future of the hedge fund industry? Hedge funds won’t have the same kind of returns because there are an increasing number of funds. Success begets success, and more people in the business means the tools of the trade become more expensive to use. When I started out, we got a nice payment on our short balances. Now, many times, you pay a fortune to borrow a stock.

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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