Institutional Investor's Alpha Magazine - November 2007 - (Page 31)

Cover Story Maverick Capital Comeback Kid By Imogen Rose-Smith O ne unseasonably warm afternoon late last month, a crowd of 200 people gathered in the auditorium of the smartly renovated Morgan Library & Museum in New York for the annual partners’ meeting of Maverick Capital. The guests, among them representatives from several of the U.S.’s most prestigious foundations and endowments, had come to hear about their money. And Lee Ainslie III, managing partner of the $11 billion hedge fund ﬁrm, had good news to share. Maverick’s main fund was up 24 percent for the year, more than triple the return of the Standard & Poor’s 500 index, Ainslie told the audience, which included Sam Wyly, the wealthy Texan who founded Maverick 17 years ago. Maverick did particularly well shorting the shares of subprime mortgage lenders, capitalizing on the collapse of the subprime market that had caused so much pain for many hedge fund managers and investment banks. When Ainslie, 43, finished discussing his firm’s performance, he turned over the podium to partner Steven Galbraith, a former chief investment officer for Morgan Stanley, to talk about the current investment environment. “I would argue that we are beginning a period of longshort nirvana,” Galbraith, 44, told Maverick’s investors, a further 200 of whom were participating in the meeting over the Internet. “My guess is that we’ve seen the bottom and we’ve got the best ahead of us.” If he’s right, it’s about time. From 2003 to 2006, during a bull market when many managers were making so much money they hardly knew what to do with it, Maverick struggled. Its ﬂagship Maverick Fund USA was up, on average, just 7.8 percent a year, managing to beat the S&P 500 only once, in 2004. Some investors worried that Maverick had lost its edge and gotten too big for its brand of long-short equity investing, which dates back more than a halfcentury to hedge fund pioneer After several years of Alfred Winslow Jones. Maverick looked, at best, old-fashstruggling to beat ioned and, at worst, completely outmoded. Many ﬁrms that had the market, Maverick started out like Maverick, doing Capital’s Lee Ainslie purely long-short equity investing, had invested more globally, is once again on top expanded into other strategies and embraced more-modern inof his game, trying to struments, from derivatives to exchange-traded funds. disprove the skeptics “Some long-short equity who questioned his funds have been making macro calls,” Ainslie told Alpha this ﬁrm’s seemingly oldspring, in the ﬁrst of a series of interviews spanning more than fashioned strategy. six months. “But that is not our job.” Ainslie’s job — pure and simple — is to pick stocks. In his model, market risk is replaced by stock-picking risk. Investors bet on the ability of the firm’s analysts, Ainslie among them, to identify stocks that will go up and those that will go down. They also count on Ainslie’s portfolio management skills to determine which ideas NOVEMBER 2007 • INSTITUTIONAL INVESTOR’S ALPHA • 31

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - November 2007

Institutional Investor's Alpha Magazine - November 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Patriot State The Good Guys: College Connection Interview: Currency of Change Cover Story: Comeback Kid Strategies: Masters of Art Research Center: Alpha Awards: Top Technology Providers Top Analysts Alpha Bytes: Critical Choice Unhedged: Commentary: Banking on a Bubble

Institutional Investor's Alpha Magazine - November 2007

For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.