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Tiger Cubs: How Julian Robertson Built a Hedge Fund Dynasty


When Archegos Capital’s implosion blew a pit worth More than 10 billion dollars Among a group of banks, one line stood out in the biography of founder Bill Huang: Tiger Management.

Before the private investment firm collapsed in March, Hwang mysturious person He famously pleaded guilty to fraud charges in 2012. His fellow investors were stunned that he could have gotten out of that to secure $50 billion in borrowing from big-hit banks to ramp up what proved to be unlucky bets.

But his lineage as a former Tiger fund manager put Hwang –
– who worked at New York-based Tiger Management from 1996 to 2001 – is among the hedge fund families. This meant that he learned his trade in a group known for amazing returns and focused stock betting, being sponsored by Julian Robertson, a hedge fund pioneer in the 1980s. The Archegos fiasco highlights how, decades after closing Tigers to outside investors, Robertson, nicknamed Tiger Cubs, still has the power to open doors for the world’s most famous banks and investors.

“If you are of Tiger origin, it helps to convince anyone to do business with you,” said a lead broker at a bank that lost money from the Archegos collapse.

Hwang is the exception that proves the rule in a group of managers that have made billions of dollars for clients. Some are now among the world’s most highly-rated investors.

“No store in the history of investment management has produced more massive people,” said Dickson Boardman, CEO of Optima Asset Management, who worked with Robertson at broker Kidder, Peabody & Co before he established Robertson Tiger in 1980.

The tiger’s influence is pervasive across global finance. Nearly 200 hedge fund firms can trace their assets back to Tiger Management, according to investor LCH Investments. They are either linked through time in the original hedge fund, or the 50 or so groups where Robertson provided seed capital for their start-ups or so-called “lovers” that spun off from the graduate companies. Only George Soros’ hedge fund, Soros Fund Management comes close to embracing several key players in the industry, according to LCH.

To date, the bond between Robertson and the accused remains strong, and they often occupy similar positions. “law Project [Hwang] He is a good friend, and I know Bill well. “I think he made a mistake and I expect he’ll get out of it and get on with it straight away,” Robertson, 88, told the Financial Times in a rare interview.

Did Hwang’s pedigree help the tiger convince the banks to lend him a lot of money? “I don’t know,” Robertson said. “I just can’t answer that question.” Hwang declined to comment for this story.

Julian Robertson in his apartment in Central Park South in New York © Pascal Perich / FT

Tiger’s record has been exceptional, with 14 years of outsmarting the US market, spurred by eye-catching deals such as shorting copper during its slump in 1996 or betting on the Thai baht the following year. It generated an average annual return of more than 25 percent net of fees between 1980 and 2000, when it returned the investor’s capital. Robertson refused to embrace him Internet stocks boomed during the late 1990s, losing 19 percent in 1999 — before he finally made his point.

In a strange way, Julian Robertson touched the assets under her management in the billions of dollars due to the fact that there were so many people who worked with him directly [or] Indirectly,” said Daniel Strachman, author of Julian Robertson: A Tiger in the Land of Bulls and Bears.

Some commentators argue that the aura around Tiger Cubs has been exaggerated or subdued in recent years, and some of the styles pioneered in Tiger Management’s early days are now popular. Lately, for example, many of these managers have been bullish on US growth stocks — a consensus trade during a period when unprecedented monetary easing sent stock markets soaring.

But few can question the success of some of the original cubs.

“The overall world success rate is not far behind that of the hedge fund community,” said Jim Newman, chief investment officer at Sussex Partners, which advises clients on hedge fund investments. “But those that have worked long-term have been extraordinarily successful and resilient in changing markets.”

Setting the “king’s table”

Many of the cubs remain good friends with each other and with Robertson, and they have developed similar investing techniques that they have learned from him. It’s a deceptively simple approach: using basic research to buy the best companies and bet against the worst.

Robertson told the Financial Times that a rigorous hiring process was key: “I think they were talented people and we pursued them in a very thoughtful and planned way,” he said. “They were handpicked very carefully.”

Philip Lafont, founder of Cowato Capital, one of the most prominent $50 billion Tiger Caps, said Tiger’s focus on hiring “quality people rather than professionals” was the “special sauce” that “created people’s culture” who were competitive, curious, and open-minded.”

The key player in this process was Dr. Aaron Stern, a psychoanalyst who has worked in various roles in the company including COO for 30 years. Dr. Stern, who died in April at age 96, was a leading expert on Narcissistic Personality Disorder and authored an influential book in 1979. Me: The American Narcissist.

“Aaron was a great guy,” Boardman Optima said. “It would be an exaggeration to say he was responsible for Julian’s success. . . But he was the one who decided who should be there, and who should be at the king’s table.”

Robertson hired Dr. Stern in the early 1990s to develop a systematic way to replicate Tiger Management’s early success in hiring talented young analysts, who until then had relied on Robertson’s instinct. The test for applicants consisted of about 450 questions and took more than three hours.

“It was very important because he did really well… the hiring technique we used,” Robertson said.

Dr. Aaron Stern in 2012

Dr. Aaron Stern in 2012 © Stefanie Keenan / WireImage

Questions can include the Rorschach test, which was developed in 1921 to detect mental imbalances. Stern also designed the tests so that applicants could not “manipulate” them by providing the answers they thought Tiger wanted.

“Some of the questions were open-ended,” said a former portfolio manager who took the test. “It was along the lines of: Is it important to cooperate well with your team or to challenge them? Would you rather be right mentally but lose money or be intellectually wrong while keeping the trade?”

The goal was to determine how applicants think, take risks, or work in teams. The process was a product of its era; Recruits were overwhelmingly male and there are no notable “tigers” in what remains to this day a male-intensive industry. However, the thought process emerged as odd. Rather than just trying to find the smartest people, Tiger searched for people who were highly competitive and excelled in fields like sports.

“Once someone had a certain amount of IQ, it wasn’t as relevant as you might think to their success,” Alex Robertson, Julian’s son and chairman of Tiger Management said today.

Two sides of the coin

Younger analysts worked alongside their more experienced peers to learn their trade. Everyone worked hard, some worked up to 14 hours a day and worked on Saturdays. The company built a gym, which Julian visits daily, on the top floor of its 101 Park Avenue headquarters to help employees de-stress.

“We were young and highly competitive analysts competing with people [in other firms] “Those who worked seven hours a day and were in the habit of eating lunches of 2 martinis,” said Lee Inslee, founder of Maverick Capital.

The company has also been keen to encourage analysts to informally share and challenge ideas, often strolling into each other’s offices to discuss the conclusion about the stock. Julian’s corner desk, a glass enclosure upstairs, had no door—something designed to encourage his staff to impress him.

“Julian early on gave you the ability to focus on being intellectually honest,” said Lafont of Coteau.

“Everything forced you to see both sides of the debate. There were no bigots at all – every coin has two sides. If Julian ever thought you became dismissive of the other side of the story, then you were seen as unprepared – because you were seen as shortsighted or narrow-mindedness in your approach.”

Dr. Stern was also instrumental in resolving arguments between analysts and explaining how Julian runs the company. “He was a great solver and problem solver,” Alex Robertson said. “He made sure everyone came together as a team.”

Alex Robertson in New York

Alex Robertson at his father Julian Robertson’s apartment in Central Park South in New York © Pascal Perich / FT

Not all cubs have turned into Vikings, Cotos or Tiger Globals. Aside from Hwang, who was described by an investor he interviewed at Tiger Management as “top secret” and “weird,” others like Tom Facciola TigerShark and Scott Phillips’ Latimer Light have closed their doors in recent years.

Unlike Julian Robertson, Dr. Stern was not universally loved in the Tiger administration, the insider said. As a strong and dominant figure, he could elicit resentment at the amount of influence he exercised over its founder. “Some people have seen him as Julien’s Horse Chase,” said one close to the company.

Betty Lee, the psychoanalyst’s wife, said Stern “loved working alongside” Robertson, particularly on charitable matters such as medical research and educational reform, and described the two as “old” friends.

tiger cubs

long-term approach

Tiger Management and its cubs are known for their long-term outlook and in-depth research on companies, talking to clients and competitors to gain insight. Robertson’s goal was to find the 20 best stocks to buy and the 20 worst stocks to bet on shorting. Tiger has typically had a leverage of 100 percent – which means the total market exposure can be as high as 230 percent.

While ratings are important, they can often be secondary to factors such as the company’s position in the industry and barriers to entry. “The investment thesis is not built around whether the company will do well or badly over the next quarter,” Lafont said. “It’s always been a long-term focus, a time horizon of three to five years.”

A similar approach has been taken by cubs such as Tiger Global’s Coleman, Laffont and Maverick’s Ainslie, whose support for tech companies that would be considered expensive by traditional valuation metrics has led to huge gains. All three have expanded to include private companies in pursuit of broader opportunities.

Investors who signed with Coleman when he launched Tiger Technology, now Tiger Global, in 2001 at the age of 25 will receive 43 times their initial investment. Coleman said Robertson’s mentorship gave the Cubs “the confidence to take risks when we identified unique opportunities.”

People familiar with the company said David Joel’s Matrix Capital, which has raised only about $1 billion from investors, has grown to nearly $7 billion through performance gains.

“Julian Robertson’s ability to recruit young analysts, train them to invest in stocks and allow them to thrive as subsidiaries is unique, given the success of so many Tiger Cubs,” said Pierre-Henri Flamand, senior investment advisor to Man GLG, part of the Group Mann listed investment manager. “This will be his legacy.”

Chronology: The Rise of the Tiger Department

1980

Tiger Management is founded by Julian Robertson, with an estimated net worth of $8 million. By the end of the year, it had achieved 54.9 percent.

1987

After years of double-digit gains, Tiger is going through a period of underperformance, eventually ending the year down 1.4 percent.

1991

Dr. Aaron Stern joins Tiger Company.

1997

After years of solid earnings, Tiger’s assets have risen to nearly $23 billion.

1998

Tiger loses about $1.8 billion due to the turmoil in the dollar-yen market and ends the year down 4 percent.

1999

Tiger, which shunned internet and technology stocks, shrinks to $8 billion as performance deteriorates again, ending the year down 19 percent.

2000

Robertson says Tiger’s hedge fund will close.



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