Tiger fund faces shutdowngreenspun.com : LUSENET : TB2K spinoff uncensored : One Thread
March 30 2000 BUSINESS NEWS
Tiger fund faces shutdown
FROM ADAM JONES IN NEW YORK A HIGH-FLYING hedge fund advised by Baroness Thatcher may be about to shut down.
Speculation last night suggested that Tiger Management, one of the world's most famous hedge funds, could close by the end of the week after its bets went sour.
If it does choose to liquidate its positions, Tiger will be the biggest hedge fund casualty since the near-collapse of Long Term Capital Management in 1998, which threatened the world financial system.
Tiger Management and its flagship Jaguar fund are said to have shrunk by about #10 billion over the past two years as investments, such as a significant stake in US Airways, performed poorly and investors withdrew money.
Tiger, started in 1980 by Julian Robertson, keeps a low profile. But a source said that Baroness Thatcher still served on the supervisory board.
Tiger would not comment.
-- - (email@example.com), March 30, 2000
This is the first pin to fall on Wall Street. Tiger was the biggest and the "class act" of all the Hedge Funds, so big that it made George Soros' operation look like the corner store.
The fact that the Fed did NOT intervene to prevent this demise--on the "too big to fail" premise--as they did in Sept., 1998, to save LTCM, a much smaller Hedge Fund--which they said at the time threatened the whole world financial structure--is, indeed, an ominous sign. It speaks VOLUMES.
Tiger combined the best blending of value investments with precise swaps timing, and rode a long upward wave, since its inception in 1980. Julian Robertson, the high-flyer originator and Big Cheese of the operation has never been available for comment before. Now, suddenly, he's available all over the place, with interviews on CNBC and CNN. His big mistake in recent years was going in so heavily for U.S. Airways, a really crappy airline. Tiger owned 20% of it. Combine this with the recent inverted yield curve paradox, which disrupts the stability of the swaps spread, and Tiger had nowhere to go--but into a nosedive. The upside down flying of the yield curve assured it. The $18 BILLION demise of the Funds assets--IN JUST 18 MONTHS--stands in glowing testimonial.
This is a classic signal of how FRAGILE our whole financial structure is at this point--a point which is about to overwhelm Alan Greenspan. So many OTHER Hedge Funds ape Tiger--are very similar in their investment composition and strategy. If this can happen to Tiger, well, LOOK OUT. About all any of us can do at this point is to stand back and get ready to yell, T-I-M-B-E-R.
-- Wellesley (firstname.lastname@example.org), March 30, 2000.
Tiger Management LLC's letter to investors
NEW YORK, March 30 (Reuters) - Tiger Management LLC released the following letter on March 30 to its limited partners, announcing the closure of its funds:
In May of 1980, Thorpe McKenzie and I started the Tiger funds with total capital of $8.8 million. Eighteen years later, the $8.8 million had grown to $21 billion, an increase of over 259,000%. Our compound rate of return to partners during this period after all fees was 31.7%. No one had a better record.
Since August of 1998, the Tiger funds have stumbled badly and Tiger investors have voted strongly with their pocketbooks, understandably so. During that period, Tiger investors withdrew some $7.7 billion of funds. The result of the demise of value investing and investor withdrawals has been financial erosion, stressful to us all. And there is no real indication that a quick end is in sight.
And what do I mean by, ``there is no quick end in sight?'' What is ``end'' the end of? ``End'' is the end of the bear market in value stocks. It is the recognition that equities with cash-on-cash returns of 15 to 25%, regardless of their short-term market performance, are great investments. ``End'' in this case means a beginning by investors overall to put aside momentum and potential short-term gain in highly speculative stocks to take the more assured, yet still historically high returns available in out-of-favor equities.
There is a lot of talk now about the New Economy (meaning Internet, technology and telecom). Certainly the Internet is changing the world and the advances from biotechnology will be equally amazing. Technology and telecommunications bring us opportunities none of us have dreamed of. ``Avoid the Old Economy and invest in the New and forget about price,'' proclaim the pundits. And in truth, that has been the way to invest over the last eighteen months.
As you have heard me say on many occasions, the key to Tiger's success over the years has been a steady commitment to buying the best stocks and shorting the worst. In a rational environment, this strategy functions well. But in an irrational market, where earnings and price considerations take a back seat to mouse clicks and momentum, such logic, as we have learned, does not count for much.
The current technology, Internet and telecom craze, fueled by the performance desires of investors, money managers and even financial buyers, is unwittingly creating a Ponzi pyramid destined for collapse. The tragedy is, however, that the only way to generate short-term performance in the current environment is to buy these stocks. That makes the process self-perpetuating until the pyramid eventually collapses under its own excess.
I have great faith though that, ``this, too, will pass.'' We have seen manic periods like this before and I remain confident that despite the current disfavor in which it is held, value investing remains the best course. There is just too much reward in certain mundane, Old Economy stocks to ignore. This is not the first time that value stocks have taken a licking. Many of the great value investors produced terrible returns from 1970 to 1975 and from 1980 to 1981 but then they came back in spades.
The difficulty is predicting when this change will occur and in this regard I have no advantage. What I do know is that there is no point in subjecting our investors to risk in a market which I frankly do not understand. Consequently, after thorough consideration, I have decided to return all capital to our investors, effectively bringing down the curtain on the Tiger funds. We have already largely liquefied the portfolio and plan to return assets as outlined in the attached plan.
No one wishes more than I that I had taken this course earlier. Regardless, it has been an enjoyable and rewarding 20 years. The triumphs have by no means been totally diminished by the recent setbacks. Since inception, an investment in Tiger has grown 85-fold net of fees; more than three time the average of the S&P 500 and five-and-a-half times that of the Morgan Stanley Capital International World Index. The best part by far has been the opportunity to work closely with a unique cadre of co-workers and investors.
For every minute of it, the good times and the bad, the victories and the defeats, I speak for myself and a multitude of Tigers past and present who thank you from the bottom of our hearts.
Julian Robertson is a truly class act and I strongly suspect we'll see him return to a place of prominence in the investment world, but sanity must return first.
-- DeeEmBee (email@example.com), March 30, 2000.
YUP! Distilled essence of CLASS!!
-- Chuck, a night driver (firstname.lastname@example.org), March 31, 2000.
Excite News search on 'tiger' and 'hedge'
-- (email@example.com), March 31, 2000.