Tiger Cubs: How Julian Robertson established a dynasty of hedge funds

When Archegos Capital’s inside exploded and opened a value More than 10 billion U.S. dollars Among the many banks, a sentence in the biography of founder Bill Hwang stands out: Tiger Management.

Before the private investment company went bankrupt in March, Huang was A humble figure He is widely known for pleading guilty to wire fraud charges in 2012. The other investors were stunned. He could have obtained 50 billion US dollars in borrowing from the Bank of Hitachi to increase the bet that proved to be ill-fated.

But his pedigree as a former tiger fund manager makes Huang–
-Worked at Tiger Management in New York from 1996 to 2001-In the royalties of hedge funds. This means that as a disciple of Julian Robertson, the pioneer of hedge fund in the 1980s, he learned his skills in a group known for its amazing returns and concentrated stock betting. The fiasco of Archegos highlights that decades after closing Tiger to outside investors, what Robertson calls Tiger Cubs still has the prestige to open its doors to the world’s most prestigious banks and investors.

“If you are from tiger descent, it helps persuade anyone to do business with you,” said the main broker of one of the banks that lost money in the Archegos collapse.

Huang is an exception. It proves the rules of a set of managers who have made billions of dollars for their clients. Some people are now one of the most highly rated investors in the world.

Dixon Boardman, CEO of Optima Asset Management, said: “In the history of investment management, no company has cultivated such extraordinary talents.” He worked with him before Robertson founded Tiger in 1980. Robertson worked with the agent Kidder, Peabody & Co.

Tiger’s influence is scattered in the global financial sector. According to investor LCH Investments, nearly 200 hedge fund companies can be traced back to Tiger Management. They have been linked over time either in the original hedge fund, in the 50 or so groups that Robertson provided seed funding to conduct business, or as the so-called “grandsons” who left alumni companies. According to LCH, only George Soros’ hedge fund Soros Fund Management has come close to incubating many key players in the industry.

Even now, the connection between Robertson and his allegations is still strong, and they often hold similar positions. “Bill [Hwang] A good friend, I know Bill very well. I think he made a mistake and I hope he can get out of the predicament and he will keep going,” 88-year-old Robertson told the Financial Times in a rare interview.

Does Huang’s outstanding tiger pedigree help persuade the bank to lend him so much money? “I don’t know,” Robertson said. “I just can’t answer this question.” Huang declined to comment on this story.

Tiger has an excellent record, beating the US market in its 14-year performance, thanks to high-profile transactions such as shorting copper during the decline in 1996 or shorting the Thai baht the following year. Between 1980 and 2000, when it returned investor capital, it provided an average annual rate of return (net of fees) of more than 25%.Robertson Refuse to hug During the Internet boom in the late 1990s, Internet stocks fell 19% in 1999-until his view was finally proven correct.

“Julian Robertson had access to trillions of dollars in assets under management in a strange way because too many people worked directly for him [or] Indirectly”, Daniel Strachman said, he was Julian Robertson: Tigers in the Land of the Bulls and Bears.

Some critics believe that the atmosphere of Tiger Cubs has been exaggerated or darkened in recent years, and some methods pioneered by Tiger Management in the early days are now commonplace. For example, recently, many of these managers have been bullish on U.S. growth stocks—a consensus transaction in a period when unprecedented monetary easing pushed the stock market higher.

But few people would question the success of some primitive cubs.

Jim Neumann, chief investment officer of Sussex Partners, who advises clients on hedge fund investment, said: “The success rate of the entire field is not far from that of the hedge fund world.” “But those long-term successful companies are Very successful and able to adapt to the ever-changing market.”

Laying “The King’s Table”

Many cubs are good friends with each other and with Robertson, and have learned similar investment styles from him. This is a seemingly simple method: use basic research to buy the best companies and short the worst.

Robertson told the Financial Times that a strict recruitment process is the key: “I think they are talented people, and we look for them in a very thoughtful and planned way,” he said. “They really selected it very carefully.”

Philippe Laffont, the founder of Coatue Capital, is one of the most famous Tigers and manages US$50 billion in assets. He said that the Tigers focus on recruiting “comprehensive people rather than experts.” The “special seasoning” that “creates a people-oriented culture”. They are competitive, curious and outgoing.”

The key person in this process is Dr. Aaron Stern, a psychoanalyst who has held various positions in the company, including chief operating officer for 30 years.Dr. Stern passed away in April at the age of 96. He is a leading expert on narcissistic personality disorder and wrote an influential book in 1979 Me: Narcissistic American.

“Aaron is an amazing person,” Optima’s board member said. “It would be too much to say that he is responsible for Julian’s success… but he is the one who decides who should be there and who should be at the king’s table.”

In the early 1990s, Robertson used Dr. Stern to develop a systematic method to replicate the early success of Tiger Management, hiring talented young analysts. Prior to this, these analyses relied on Robertson’s intuition. The applicant’s test included approximately 450 questions and lasted more than three hours.

“He is very important because he really did a perfect job… this kind of recruitment technique we use,” Robertson said.

Questions may include the Rorschach test, which was developed in 1921 to detect mental imbalances. Stern also designed the exam so that applicants can’t “play” them by giving the answers they think Tiger wants.

“Some questions are open-ended,” said a former portfolio manager who participated in the test. “The idea is: is it more important to get along with your team or to challenge them? Are you more willing to be intellectually correct but lose money, or make intellectual mistakes but save the deal?”

The purpose is to determine how the applicant thinks, takes risks, or works in a team. This process is a product of its era. The vast majority of new employees are men, and there is no significant “tigress” in a male-dominated industry today. Nevertheless, the thinking process is still weird. Tigers are not only looking for the smartest people, but also for those with fierce competition and outstanding performance in sports and other fields.

“Once someone has a certain IQ, it and their success are really not as important as you think,” said Alex Robertson, Julian’s son and president of today’s Tiger Management Company.

Two sides of the coin

Young analysts learn their trading together with more experienced peers. Everyone works hard, and some people work as long as 14 hours a day, and work on Saturdays. The company built a gym that Julian goes to every day on the top floor of its headquarters at 101 Park Avenue to help employees relieve stress.

“We are young and very competitive analysts, competing with others [in other firms] Lee Ainslie, founder of Maverick Capital, said: “They work 7 hours a day and are used to two martini lunches.”

The company is also keen to encourage analysts to share and challenge ideas informally, often walking into each other’s offices to debate stock conclusions. Julian’s own corner office, a glass wall on the top floor, without doors-this is to encourage his employees to sell to him.

“The early days of Julian allowed you to focus on being intellectually honest,” said Coatue’s Laffont.

“Although he forces you to see both sides of the debate. There has never been a fanatic-every coin has two sides. If Julian thinks you are dismissive of the other side of the story, then you will be considered unprepared ——Because you are seen as short-sighted or too narrow-minded.”

Dr. Stern also played a key role in resolving disputes between analysts and explaining how Julian runs the company. “He is an excellent solution man and problem solver,” said Alex Robertson. “He made sure everyone was united.”

Not all cubs become Vikings, Coatues or Tiger Globals. An investor who met with him at Tiger Management stated that in addition to Hwang’s “very mysterious” and “quirky”, Tom Facciola’s Tigershark and Scott Phillips’ Latimer Light have closed their doors in recent years.

Insiders say that unlike Julian Robertson, Dr. Stern is not universally popular within Tiger Management. As a powerful and dominant personality, he may provoke dissatisfaction with the influence he exerted on his founder. “Some people think he is Julian’s horse-speaker,” said a person close to the company.

Stern “likes to work side-by-side with Robertson,” especially on charity issues such as medical research and educational reform. Betty Lee, the wife of a psychoanalyst, said she described the two as “long-term” friends.

Long-term approach

Tiger Management and its cubs are known for their long-term outlook on the company and in-depth research, talking with customers and competitors to gain more insights. Robertson’s goal is to find the best 20 stocks and the worst 20 stocks through short selling. Tiger usually runs about 100% leverage-which means that the total market exposure can be as high as 230%.

Although valuation is important, it is often inferior to factors such as the company’s position in the industry and barriers to entry. “The investment argument has never been around whether a company’s performance in the next quarter is good or bad,” LaFont said. “This is always a long-term focus, with a three to five year time frame.”

Cubs such as Tiger Global’s Coleman, Laffont, and Maverick’s Ainslie have taken a similar approach. Their support for technology companies that may be considered expensive on traditional valuation metrics has already produced huge benefits. In order to seek broader opportunities, all three have been extended to private companies.

Coleman signed with him when he founded Tiger Technology (now Tiger Global) in 2001, and the 25-year-old investor received 43 times the initial investment. Coleman said that Robertson’s guidance gave the cubs “the confidence to take risks when we discover unique opportunities.”

People familiar with the company said that David Goel’s low-key Matrix Capital has only raised about $1 billion from investors, and has grown to about $7 billion through performance growth.

“Considering the success that many Tigers have achieved, Julian Robertson’s ability to recruit young analysts, train them to make equity investments, and allow them to thrive as spin-offs is unique,” Man’s senior investment consultant Pierre-Henri Flamand GLG It is part of Man Group, a listed investment management company. “That will be his legacy.”