Julian Robertson Saw It Coming
He managed $22 Billion, but then ended it all...
Good morning, everyone.
This week’s newsletter includes: the real life ‘Tiger King’ (before the weird Netflix doc), and Big Short investor Michael Burry’s next bet.
Principles Vs Popularity
Julian Robertson built an enormous $22 Billion hedge fund, but dramatically shut it down in the middle of a huge bull market. Here’s why he walked away…
Julian Robertson was one of Wall Street’s most celebrated investors.
By the 1990’s, his fund - Tiger Management - was managing $22 billion and had delivered incredible above market returns for nearly two decades.
However, as the dot-com bubble inflated, the financial world went into a frenzy.
Other investors poured into speculative dot-com companies.
But Julian stuck to his principles by investing in companies with solid profits that he understood. He thought the tech boom was irrational:
“Bubbles are made when people stop thinking.”
The result?
His fund’s performance began to lag, his investors became frustrated and started pulling their money.
By 1999, Tiger Management had posted three years of underperformance and traders were threatening to go on strike unless they could invest in dot-com companies.
The situation was dire.
Julian faced a dilemma: abandon his value-based approach to chase the dot-com boom.
Or, stay true to his principles.
In March 2000, Julian shocked the financial world by announcing the closure of Tiger Management.
He returned billions of dollars to investors and said:
“We are not willing to be part of this irrational market. We’d rather shut down than abandon our discipline.”
Critics were harsh.
The media labelled him a relic, claiming he had failed to adapt to a “new era” of investing. One article said: “Tiger’s fall is a lesson in the dangers of sticking to outdated principles.”
Just months after Tiger closed, the dot-com bubble burst in dramatic fashion.
Markets tanked, trillions of dollars in value evaporated and dot-com tech stocks collapsed. Conversely, value stocks - the stocks Julian had championed - became a haven for investors, outperforming significantly despite the market turmoil.
He was vindicated.
After shutting down Tiger Management, Julian focussed on seeding other hedge funds and his “Tiger Cub” mentees went on to found some of the most successful hedge funds in history.
Before his death, Julian remarked on that remarkable period:
“I always told you value investing would win!”
Recommendation’s
Big Short investor Michael Burry recently shut down his Scion Asset Management hedge fund, blaming ‘market exuberance’ in the AI sector. Some scoffed, some took note. See his final letter here.
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