Julian Robertson, who created one of the most successful hedge funds of the late 20th century and later founded many of his protégés’ firms, died Tuesday of heart complications at age 90.
Behind the style of “controlled aggression”, so-called Forbes described in a 1990 story, Robertson’s Tiger Management outperformed peers such as George Soros and Michael Steinhardt for years by finding undervalued small-cap stocks, buying into “forgotten markets” and short-selling industries where Robertson was bearish. often goes against conventional wisdom. His Tiger Management returned 32% a year from its launch in 1980 through 1998, and assets peaked at $22 billion before a short bet gone wrong against the Japanese yen led to a wave of withdrawals.
Robertson closed the firm in 2000 and created some of today’s most notable and successful hedge funds known as Tiger Cubs, including Chase Coleman’s Tiger Global, Philippe Laffont’s Coatue Management and Stephen Mandel’s Lone Pine Capital. Forbes recently estimated his fortune at $4.7 billion. He first appeared on our Forbes 400 list of the richest Americans in 1997.
“Hedge funds are the antithesis of baseball,” Robertson said Forbes in 2013. “In baseball, you can hit 40 home runs on a major league team and never get paid anything. But in a hedge fund, you are paid according to your average return. So you go to the worst league you can find, where there’s the least competition.”
Excluding his wealthy clients, which over the years have included writer Tom Wolfe and singer Paul Simon, Robertson’s Tiger Management has produced no fewer than six billionaire hedge fund managers. One notable Tiger alumnus, Bill Hwang, amassed a $35 billion fortune at Archegos Capital Management before it collapsed in a matter of days in 2021. He now faces 11 counts of market manipulation.
Starting a hedge fund was a second career for Robertson, a native of Salisbury, N.C., who graduated from the University of North Carolina at Chapel Hill. He spent two years in the Navy and then 21 years at the former white-shoe investment bank Kidder Peabody, starting as a stockbroker and becoming chairman of its investment arm. In 1978, he took his wife and two young children on a year-long vacation to New Zealand, where he wrote an autobiographical novel he never published about a young southerner in New York.
“I think I write fairly well, but I’ve learned this year that I’m not a novelist by any stretch of the imagination,” Robertson said. Forbes in 2012, although he maintained a lifelong attachment to New Zealand and operated several resorts and golf courses there.
Returning to the US and reinvigorated, Robertson rejected the administrative work and dwindling commissions of stockbroking and tried his hand at a new type of firm called a hedge fund at age 48. He and his partner Thorpe McKenzie started Tiger Management in 1980 with $8.8 million, including $1.5 million that constituted essentially all of their own available capital.
“I like to compete — against the market and against other people,” Robertson said Forbes during Tiger’s heyday in the 1990s.
His success made him one of the wealthiest and most respected minds on Wall Street, although he never gave up his Southern drawl and was a generous philanthropist, giving away more than $1.5 billion to causes such as medical research and environmental protection . His gift of $24 million in 2000 created the Robertson Scholars Program, which gives students from his alma mater UNC and its neighboring rival Duke the full opportunity and encourages collaboration between the two schools.
In his later years, Robertson said he might choose a different career if he came of age now.
“People wonder why hedge funds aren’t doing better – I think it’s from the increasing competition from other hedge funds,” he said as one of the 100 Greatest Living Business Minds featured on on Forbes 100th anniversary in 2017 “If I were starting now, I’d look at what the competition is in different areas – and then look at some that aren’t as popular.”
In the 1980s, Robertson’s methods were innovative. Below is the first article Forbes published on Robertson, part of an April 1985 cover story titled “Short Sellers: What Meat They Eat.” It was a time when stock portfolios containing both long and short positions and performance fees of 20% were both new and controversial.
A tiger’s purr
By Matt Shiffrin
hedge fund manager Julian Robertson hates cats because they kill birds, but dogs are something else. “I love dogs,” says Robertson, who runs two New York-based hedge funds. To own? No, for a short sale.
He’s referring to stocks like Tandem Computers, Newpark Resources Pizza Time Theater and Petro-Lewis, which helped him rack up 25% gains in a gloomy market last year.
“There are huge opportunities on the short side,” says Robertson, who, despite his distaste for cats, calls his funds Tiger and Jaguar — a case, perhaps, of his dislike of the feline breed overriding his admiration for their power. He keeps the couple well fed. Started in 1980 with $10 million, Tiger and Jaguar now have $160 million in equity and have afforded such lucky limited partners as singer Paul Simon and writer Tom Wolfe, net returns averaging 40% a year. It might not be sustainable, but it’s still appetizing.
A true hedger, Robertson works both sides of the market, the short and the long. He uses the same techniques in both. “Julian is not a shooter like other hedge fund people,” says Elliot Fried, chief investment officer at Shearson Lehman Brothers. “Tiger doesn’t invest and then investigate.”
Instead, Tiger treats all of its 160 positions — long and short — as long-term investments. (Jaguar, smaller, with mostly foreign partners, is more nimble.) Tiger is still drawing down oil service stocks after almost two years. Also, there have been huge losses (“several million dollars”) in shorts of generic drug firms. “It still sticks,” says Robertson.
Sticking sometimes means stuck. Admits Robertson, “In August 1981, I shorted Dean Witter at 29 because I was bearish on brokerage stocks. Sears took over for Dean Witter. Tiger had to cover at 48 and lost over $250,000.” Sometimes he’s right for the wrong reason. “I once went on with Babcock & Wilcox because I was optimistic about nuclear power. Then McDermott came to acquire B&W and I did a package.” He pauses and smiles. “I ended up being right about Witter and wrong about B&W, but I made money where I was wrong and lost money where I was right. You have to have a sense of humor in this business.”
Robertson’s only other job was with Kidder Peabody for 22 years, first as a broker and later as chairman of the investment affiliate, Webster Management. After years of barely beating the market, Robertson left to start Tiger. He analyzed his mediocre results and concluded that he spent too much time on administrative duties and was too constrained by institutional constraints. “We didn’t manage the money,” he says. “Now we do it all day and it’s fun.”
But it’s not all fun and games for the Tiger crew. Robertson expects intense fundamental analysis of each position. If none of Tiger’s four portfolio managers can handle the job, Tiger hires consultants to help with the analysis. On salary were the head of a large insurance company, a doctor and an aviation specialist.
Recently, Tiger has been stalking medical technology companies. Robertson admits he’s not a medical expert, so Tiger’s medical consultant, MD-MBA John Nicholson, helps the firm find potential shorts and longs.
As with other hedge funds, Tiger’s crew gets paid handsomely when profits come in and not at all when they don’t. Robertson and his three sons have the largest stake in the partnerships, with nearly 13 percent of the $160 million capital. Also, as a general partner, his share of profits was 20%, about $5 million last year. (However, if the funds have several down years, Robertson doesn’t get paid until the fund climbs to the last point at which it withdrew from profits.)
Robertson estimates that about 30% of his 20% share goes to paying portfolio managers. The rest is gravy. A sliding management fee of about 0.8% of assets pays for overhead and backup staff.