The world lost an investment titan last month with the passing of Julian Robertson at the age of 90. Robertson was truly a pioneer in the hedge fund industry, an industry that has grown to roughly $4 trillion in assets under management this year, as compared to merely $260 billion when Robertson shuttered his fund.
He has left behind a legacy of successful investors as well as some sound investing lessons that I do my best to adhere to in Cabot Explorer, one of which is particularly appropriate for all investors and is shared, in Robertson’s own words, at the end.
He was a great stock picker with Kidder Peabody before forming Tiger and had a big personality and extensive network of advisers. For two decades, Mr. Robertson led Tiger Management, which invested long and short all over the world. He also trained and supported a number of successful managers who became known as “Tiger Cubs.”
During the two-decade run of Tiger Management, which ended in 2000 with his decision to just manage his own money, the hedge operation averaged a 25% return annually.
Julian Robertson was a southerner with an outsized personality and an appetite for the finer things in life. I called on Robertson at their offices on Park Avenue as an institutional broker in the 1990s. Each and every visit was an education and also exciting as he paid handsomely for good ideas and intelligence. He wanted data to back up hunches and wanted it fast.
I recall that he managed holdings aggressively, removing good companies to make room for better ones, not risking more than 5% of capital on one bet, and not overreacting to pullbacks in the market. Tiger did a lot of checking and research before making a decision but then moved decisively. One legendary story is when considering shorting an automaker because of rumored mechanical failures, he bought two cars and had mechanics take them apart to confirm the story.
Robertson “was like a sponge, constantly soaking up as much information as he could,” wrote Daniel Strachman in his biography, “Julian Robertson: A Tiger in the Land of Bulls and Bears.”
Julian also was very open to overseas investing at a time when most U.S. money managers preferred to stay close to home. Finally, he often bucked conventional wisdom with high-conviction trades. For example, in the mid-1990s as copper prices had soared beyond reason, Robertson bet against the metal. When the copper market crashed. Tiger cashed in.
Unfortunately, Robertson did not understand tech all that well and began placing some big macro bets in bonds and foreign exchange in the late 1990s. A wrong bet on the yen in 1998 began a trend with Tiger’s assets going from $21 billion to $6 billion because of losses and investor withdrawals.
As Robertson exited day-to-day management, he sponsored a number of “Tiger Cub” start-up funds and over his life contributed more than $2 billion to charity.
A FINAL STOCK INVESTING LESSON FROM JULIAN ROBERTSON
Robertson once explained his overall technique this way: “Our mandate is to find the 200 best companies in the world and invest in them and find the 200 worst companies in the world and go short on them. If the 200 best don’t do better than the 200 worst, you should probably be in another business.”
Not a bad strategy or mission statement.