Tuesday, March 19, 2013

Insights from hedge fund legend, Julian Robertson

While looking through some archived interviews at Financial Sense, I found this 2004 interview on hedge fund legend, Julian Robertson with author Daniel Strachman

Julian Robertson Tiger hedge fund manager
Although Strachman's book on Julian Robertson was not terribly well received (see reader reviews), this interview does offer some worthwhile anecdotes and insights on one of the hedge fund industry's great investors. Let me share a few with you here.

1. Hedge funds began as an alternative investment vehicle for high-net worth individuals. Later, they came to fill the void of liquidity in the marketplace left by the trading operations of once-private firms such as Goldman Sachs, J. Aron, Lehman Bros., JP Morgan, etc.    

2. The strength of Tiger Management was in its highly focused research efforts (pre-web) and Robertson's willingness to follow his conviction on a trade or investment. 

Julian was unmoved by price movements that went against his positions if he had conviction in a trade and the fundamental story. This worked in his favor at times (copper in the mid-'90s) but proved to be a disadvantage at other times (shorting tech stocks during the earlier part of the dot.com bubble - though he refrained from shorting them again in '99).

3. Robertson is very competitive and also able to delegate research and decisions to his team, utilizing their expertise in order to get the best investment results. He is a Graham and Dodd investor, but he also found great success by applying aspects of this investing philosophy beyond the world of stocks (in currencies, commodities, etc.).

4. Julian met hedge fund pioneer, Alfred Winslow Jones and from Jones he learned lessons on business organization and the advantages of delegating research work. He also learned that the hedge fund structure could be very profitable and he brought his investing talents to bear in this format.    

5. Among the factors that led to Tiger Fund's demise in 2000: Robertson's decision to avoid participating in the dot.com bubble led to a decline in AUM. Also, younger managers who had helped build Tiger (the "Tiger cubs") went off to start their own hedge funds and were gradually replaced by Wall St. veterans. Younger and hungrier workers who had been the lifeblood of the firm left, taking their performance abilities with them.

6. When asked what he most admires about Julian Robertson, Strachman relates the story of their first meeting, which "deeply affected" him. He was nervous about the meeting, but was struck by Robertson's ability to make people feel welcome and valued, "a great skill". Julian is incredibly driven to win, but he also knows there is "no I in team" and he leverages the strengths of those around him.

In addition to Strachman's book, Sebastian Mallaby's book on hedge funds also carries some background on Julian Robertson and Tiger Fund, as well as other industry pioneers.

You can check out our related posts to hear more from Julian Robertson, including his thoughts on the increasingly competitive environment for hedge funds. 

You'll also learn more about hedge fund pioneer Alfred Winslow Jones, who was mentioned in Strachman's interview.

Related posts

1. Julian Robertson interview with FT.com.

2. Julian Robertson interview with CNBC.

3. Julian Robertson on hedge fund strategy and competition (Bloomberg).

4. A.W. Jones and the history of hedge funds.