Institutional Investor's Alpha Magazine - November 2007 - (Page 34)

Maverick Capital becoming a multistrategy ﬁrm was in the best interest of his investors. “I’m not sure I would be able to add value consistently in a wide variety of investment opportunities,” Ainslie says. “I do, however, have signiﬁcant conﬁdence in our ability to add value consistently in long-short equity investments, and there is a lot to be said for staying focused.” During Maverick’s ﬁrst decade in business, Ainslie managed the difﬁcult balancing act of centralizing authority around himself as portfolio manager and delegating responsibility to the senior members of his investment team. Early on he organized the now 163-personﬁrm so that no single professional is responsible for covering, on average, more than five stocks in the portfolio. The firm’s investment universe is divided into six industry sectors — health care, consumer, financials, industrials, media and telecommunications, and technology — each run by a sector head who oversees several analysts. Maverick also has specialists in speciﬁc geographic regions, including Japan and Latin America. Ainslie is responsible for portfolio construction and sector weightings. Unlike Tiger, where analysts often had to fight with Robertson to get their investment ideas into the portfolio, Maverick has a more collegial environment. “The thing that Lee didn’t adopt — the part that most managers who came out of Tiger didn’t adopt — was the strong hand,” says Lookout Mountain’s Caldwell. “Julian was a much better team builder than he was a manager.” Ainslie, who became majority owner of Maverick on January 1, 1997, has rarely had a problem managing his team. “I have very fond memories of Maverick,” says Robert Bishop, who headed up the industrials sector from 1998 to 2002 before leaving to become CIO of Soros Asset Management. “Operationally and culturally, the firm stood out.” Bishop had first met Ainslie in 1992, when they were both analysts at Tiger. In 1998 Ainslie convinced Bishop, who was working as a portfolio manager at Kingdon Capital Management, to join Maverick, which by then had opened a small New York ofﬁce. (In 2000, Ainslie and most of the rest of the Dallas investment operation moved to New York.) “We were a unique group of people,” Bishop says. “Lee is very good at knowing who he wants to bring in and working to get that person.” INVESTING THE MAVERICK WAY is a painstaking endeavor. Ainslie and his team try to identify the best and worst companies in each of the sectors in which they invest, performing detailed, on-the-ground research by talking to each company’s management, suppliers, competitors and customers. They use the intelligence they gather to build their own financial forecasts, which they then compare against those of Wall Street analysts to ﬁnd “I was very impressed with the way Lee thought about building a business,” says consumer sector head Brian Zied. 1995, was right. Many hedge funds, including Omega, took a hit when Russia defaulted on its government bonds in August 1998. None suffered a worse fate than LongTerm Capital Management, which lost $4.6 billion and had to be bailed out by a consortium of investment banks organized by the Federal Reserve Bank of New York. The average hedge fund was up 2.6 percent in 1998, according to Chicago-based Hedge Fund Research. In the midst of the maelstrom, Maverick was up 28.1 percent. Ainslie’s old employer wasn’t so fortunate. After reaching a then-record $21 billion in assets in July 1998, Tiger lost $600 million during the Russian debt crisis. That began an 18-month downward spiral that would see its assets shrink to less than $7 billion. In 1999 Robertson began talking to Ainslie about having Ainslie take over the Tiger portfolios or combining the two firms. After months of discussion, the two agreed that it would be difﬁcult to come up with a solution that would satisfy both ﬁrms’ investors. “We talked about it, and discussions went fairly far,” Robertson recalls. “But it is hard when you have something like that to say how close it came to happening.” Merging with Tiger would have transformed Maverick overnight into the world’s biggest hedge fund firm and changed it from a long-short equity specialist into a multistrategy manager. After serious consideration, Ainslie and his senior investment team decided not to take their ﬁrm in that direction. Although Ainslie recognized the advantages of diversification, he didn’t think 34 • INSTITUTIONAL INVESTOR’S ALPHA • NOVEMBER 2007

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

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