To: Dick Weigel who wrote ( 77004)7/28/2011 9:33:33 AMFrom: The Black Swan of 77201
Soros fund closes, but influence remains By Sam Jones, Hedge Fund Correspondent
George Soros may be shutting his celebrated Quantum Fund to outsiders and ending a very public investment career, but he and his four-decade old asset management firm will remain among the most influential investors in the world.
For Soros Fund Management – a firm that is, in dollar terms, the most successful hedge fund ever, having returned $35bn for its investors since it was established in 1973 – the move to being a family office is about avoiding changes, not making them.
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Soros Fund Management’s decision to return the $1bn or so of third-party funds it holds has long been on the cards, and the sum is a fraction of the $25.5bn the firm manages in its investment portfolio.
As Mr Soros’ two sons, Jonathan and Robert, who run Soros Fund Management, said in their letter to investors sent on Monday, the step is the “completion” of a transition begun “eleven years ago”.
The firm is famous for its successful $10bn bet against the British pound in 1992. But since 2000, Mr Soros has run it as more of a conservative, albeit sophisticated, family office than a high-octane hedge fund.
Back then, with 90 per cent of the Quantum Fund in cash, Mr Soros announced to his investors that he would be changing the firm’s investment objectives, with a focus on preserving wealth rather than generating it.
He cut the targeted annual return of the fund in half from 30 per cent to 15 per cent. His top investment managers, Stan Druckenmiller and Nick Roditi quit the firm, and most of its largest, highest profile external investors did too. That left the successor organisation, renamed the Quantum Endowment Fund, to manage mostly family money.
Just as now, the backdrop to the move was a market in which Mr Soros saw few opportunities and many pitfalls.
Indeed, it was revealed earlier this month, that just as in 2000, the Quantum Endowment Fund had a huge portion of its portfolio in cash.
This time around, however, the ostensible cause of SFM’s decision to change was caused by regulation as much as market outlook.
In its letter to investors, the firm said the move to return external funds was to allow it to avoid having to register with the SEC in line with newly enacted financial regulations. That point has raised eyebrows among some in the hedge fund community, much of which has embraced a post-crisis mantra of transparency.
Whether the move will occasion a return to involvement in the firm for Mr Soros himself following the departure of chief investment officer Keith Anderson also remains to be seen.
While his day-to-day involvement with the firm he founded technically ended 20 years ago, the Hungary-born Mr Soros has periodically taken back the reins at times of particular market difficulty or change.
Mr Soros’ most recent intervention was in 2007, when the world’s markets began to unravel. The fund returned 32 per cent that year.
In 2008, when the average hedge fund lost 20 per cent, the Quantum Fund made 8 per cent, and in 2009, the fund was up 28 per cent.
It has only been in the past 18 months that the going has become more difficult. The fund managed just 2.6 per cent last year, and has lost money this year.
Now, at least, the only person Mr Soros has to be accountable to for his fund’s returns is himself. As he once said: “I was a human being before I became a businessman.”
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