Hedge Fund Career Lessons from a Tiger

More than 10 years after closing his legendary Tiger Management LLC, Julian Robertson is back, this time launching the Tiger Accelerator Fund to help young hedge fund managers get their start.

Roberts has committed $230 million of his own money to six hedge fund managers he knows well. The new portfolio, which is being marketed by Morgan Stanley, expects to raise a total of $450 million, according to Reuters.

Meanwhile, Brian Zen, CFA, PhD, author of “Superinvestor Lecture Notes”, and Chief Investment Strategist at Zenway Group, a New York-based registered investment advisory firm, offers a glimpse at Robertson’s approach to value investing in a recent guest article for Gurufocus.

Robertson built Tiger Management from $8.8 million in 1980 to more than $21 billion by 2000, reportedly delivering 28% returns to investors for 20 years. His funds got clobbered by the Internet bubble, due to shorting of tech stocks and underperformance of his value picks, and Robertson returned money to investors shortly thereafter.

Zen looks at Robertson’s mental framework as a die-hard value investor, in the Graham and Dodd model. Robertson was fond of quoting Graham. ¨Value investing is simple to grasp, easy to understand, easy to deploy but incredibly difficult to master successfully because it goes against human nature and requires a tremendous amount of patience and courage.”

Robertson’s team would use six essential factors when analyzing a business: 1) profitability; 2) stability; 3) growth in earnings; 4) financial position; 5) dividends; and 6) price history. His analysts would tap into Tiger Management’s extensive network of investors and contacts around the world to gather research intelligence. And Robertson pushed his analysts to the brink, to find hidden treasures and to justify their recommendations.

The firm was known for its Friday lunch meetings in which analysts would go through their ideas one at a time, with each tearing apart every little aspect of a potential investment opportunity to see if it was worthy of being included in the portfolio.

¨Robertson likes hearing stories presented quickly and efficiently,” said one Tiger associate quoted in the article. “The meeting was not a place to be unprepared or long-winded. Get to the point or don’t bother.” Hedge fund analysts were expected to sum up their investment ideas in four sentences. Those four sentences may have been the result of six months of work, but that was all the time you had to make your case in front of Robertson. “If something was too complicated, Robertson would not like the idea. He has to understand the idea’s story.”

What’s your take? Do you think the classic Graham-Dodd-Robertson approach to value investing is as relevant today as ever? Add your comments below.

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