INTERVIEW-Soros manager holds Tiger chief blameless
By Apu Sikri
NEW YORK, March 30 (Reuters) - Don't blame Julian Robertson for the demise of his once high-flying Tiger Management hedge fund company, says Stanley Druckenmiller, investment chief at Soros Fund Management, the world's largest hedge fund firm.
``Had I had his philosophy, I would have done exactly what he did - stuck to my knitting,' the Soros executive told Reuters.
``A lot of disciplines that worked for many years have been out of fashion for the last 18 months. That does not mean they won't come back. Disciplines work over the long-term but they can be out of favor over periods,' Druckenmiller, who is managing partner at the $19 billion Soros Fund Management, said in a telephone interview.
Robertson announced on Thursday that he was closing all six hedge funds run by Tiger and would return most of their $6 billion in assets to investors. Eighteen months ago, Tiger assets totaled $22 billion.
Robertson told Tiger's partners that after two decades of running the firm, he decided to close the funds as he did not see an end to the bear market in value stocks.
Shares of companies that have relatively higher earnings than what is priced into their share price are referred to as value stocks.
Tiger's problem may have involved a lack of liquidity, or the ability to meet redemptions while holding onto investments, rather than bad stock picking, Druckenmiller said.
Robertson earned a reputation over the past two decades for giving investors stellar returns through his astute choice of value stocks.
Druckenmiller praised Robertson for sticking to his guns in recent years even as a majority of investors shifted to buying stocks promising high growth from the effects of what is widely viewed as a technological revolution.
Soros has often had a different style than Tiger, moving investments from stocks to bonds to currencies, depending on conditions, to take advantage of shifting markets.
For example, while Tiger largely steered clear of technology stocks, Soros last year increased holdings in the sector.
``We make strategic shifts but we don't have a philosophy that ties us to value or growth or to currencies or bonds. We just sort of feel that directional trends are predictable. A lot of people think they are not. We think they are,' Druckenmiller said. He declined to say what percentage of Soros assets are now in technology.
Soros earned fame in the early 1990s by making $1 billion in a bet against the British pound.
But Druckenmiller says the dichotomy between the ``old economy' and ``new economy' stocks that hurt Tiger and forced its closure this week remains a bit of a mystery.
``I am genuinely conflicted,' he said, referring to the huge run up in Internet and other technology stocks which have left shares of older companies in the dust.
``I think that a lot of the growth stocks have merit in the second inning. Particularly if you can pick companies with barriers to entry,' said Druckenmiller, who personally runs Soros's $11.5 billion flagship Quantum fund.
``But a lot of these (high-tech) companies don't have barriers to entry and I think it's kind of silly to pay 50 to 100 times revenues for companies that we don't believe have long-term barriers to entry,' he said.
While investors cannot ignore the high-flying tech sector, stock selection would be key, Druckenmiller said.
``If you'd paid 100 times earnings for Microsoft (NasdaqNM:MSFT - news) 10 years ago ... it still would have been a great investment, so would Cisco (NasdaqNM:CSCO - news),' he said, citing two high-tech firms with extraordinary returns.
But ``others that are more commodity businesses and they are selling at 200 times, 300 times revenues, I don't get it. I don't know if I am right or wrong. This is an extraordinarily difficult time,' he said. |
