NY Times. Soros Names Executive for Fund Family [G* mention]
(via G* yahoo thread)
August 11, 1999
By RICHARD A. OPPEL Jr.
EW YORK -- Hoping to turn around a dismal performance at
his $13 billion hedge fund family, George Soros has picked
Duncan Hennes, the former treasurer of Bankers Trust Corp., to serve as
chief executive, with a mandate to end the personnel turmoil and other
problems that have led to huge investor redemptions over the last year.
After a long search and interviews with several Wall Street executives,
Soros picked Hennes, 42, to be in charge of hiring, compensation and
other administrative chores and to oversee the arbitrage operation after
the departure three months ago of the arbitrage specialists.
The addition of Hennes will free Soros Fund Management's top stock
picker and chief investment strategist, Stanley Druckenmiller, who
manages the flagship $6.7 billion Quantum Fund, to spend more time on
investments.
Soros officials said Druckenmiller had asked Soros at the beginning of
the year to hire someone to take over administrative duties because those
jobs had become too great a burden. Though he is recognized as one of
the world's leading investors, Soros has not played an active role in
day-to-day investing decisions at the funds in a decade, focusing his time
instead on philanthropic and other activities.
Hennes' appointment, reported Tuesday in The Wall Street Journal, also
signals a lesser role at the fund family for Gary Gladstein, a longtime
senior Soros executive who previously had handled some of the duties
being assigned to Hennes. Gladstein, a 14-year employee of the Soros
operation, had asked earlier that his duties be cut back, a Soros
spokesman said. Gladstein, who did not return a telephone call seeking
comment, is expected to stay.
From 1992 through the end of last year, the Quantum fund returned more
than 400 percent. But so far this year, the fund is down 11.2 percent,
buffeted by a decision to sell Internet stocks short -- in hopes they would
decline -- and by a bullish position on the single European currency.
Instead of playing out the way portfolio managers had expected, the
Internet shares continued to rise while the euro weakened. The two
developments cost the fund more than 15 percent of its assets.
The fund has also been hurt because of its huge position in Waste
Management Inc., which has suffered through an accounting scandal that
has sent shares down more than 50 percent. But some other top stock
holdings, including stakes in Enron Corp. and Globalstar
Telecommunications Ltd., have performed well recently.
Personnel problems have also plagued the Soros funds lately. In May,
three top analysts who headed the firm's "special situations" investments,
including merger arbitrage, departed to form a new money-management
firm, Satellite Asset Management. And more recently, a half-dozen other
Soros analysts have either been dismissed or quit, departures that a
person close to the fund said were performance-related.
In an interview, Hennes said that Soros had given him a twofold mandate:
"To get the operation in order in terms of administration, and the second
challenge is to expand the franchise, and that's the one which is obviously
less defined."
But already clear, he said, is the need to rebuild and expand the firm's
arbitrage operation. One of Hennes' duties at Bankers Trust was
overseeing the division that handled arbitrage.
Although the fallout from the demise of Long-Term Capital Management
LP is 12 months old, he noted, not as much Wall Street money is chasing
merger arbitrage. "There are some holes out there that need to be filled,"
he said. Decisions about how much money to allocate to arbitrage will be
made in conjunction with Druckenmiller, but he said: "Clearly, we need to
hire a new team there. There may very well be other areas of arbitrage
we may want to get into."
He also said that he hoped to expand the private-equity investments
overseen by Frank V. Sica, a former co-head of merchant banking at
Morgan Stanley Dean Witter who joined the Soros group in May 1998.
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