Julian Robertson was the best stock-picker on the Street. Has he lost his magic?
Julian H. Robertson Jr. is warming to his subject. He is bald and burly, over six feet tall, 63 years old, with a deep, booming North Carolina drawl. The subject is stocks, and Robertson is alive, animated. Uni Storebrands. Ever heard of it? Robertson has. And how. It is his largest holding–an obscure Norwegian insurance company. He’d like to buy more, but local regulations forbid it. Swiss Reinsurance Co. is another favorite. So is Harrah’s Entertainment Inc. Citicorp? Absolutely. Japanese banks are another matter. “The worst in the world,” he says flatly.
Stocks are what turned Julian Robertson from an obscure broker-turned-money manager into a power in the world markets. Robertson is the founder and chairman of Tiger Management Corp., Wall Street’s global-investing powerhouse. George Soros may be the savant of the currency markets, but when it comes to stocks, Julian Robertson is the master–poised, ivory-towerish, in a top-floor, glass-walled office on Park Avenue. And even as a global currency-trading “macro” player, he could give Soros a run for his money. Year after year of brilliant returns lured the high-octane investors–at $5 million or more a head–who turned $8 million in 1980 into $7.2 billion in 1996. Robertson was ahead of the curve on every major trend in investing, from the surge in European equities that followed the fall of the Berlin Wall to the tumult in the global bond markets in 1992 and 1993.
Robertson was the reigning titan of the world of hedge funds–the secretive, often highly leveraged private investment partnerships that are the piggy banks of trust funds, endowments, and millionaires. Robertson assembled a team of the smartest and best-paid stock-pickers on Wall Street–a “Super Bowl team,” as his friend and adviser, Dr. Aaron Stern, puts it.
At his peak, no one could best him for sheer stock-picking acumen. Robertson was the Wizard of Wall Street. And he was paid well for it. In 1993, his compensation and share of Tiger’s mammoth gain probably exceeded $1 billion.
But something toppled him from that pinnacle. It all began with a disastrous first quarter of 1994. In contrast to a stunning 1993, when Tiger’s funds gained 80% before fees, his funds declined 9%. Investors, who had poured money into Tiger in 1993, began to pull out. In 1995, as still more investors defected, he eked out a pre-fee gain of 17%, a humiliating 20 points below the Standard & Poor’s 500-stock index. And even though Robertson began to do well again in 1996, climbing 17% in January, his gains soon were cut almost in half–and his revival has all the makings of a bump on a downward slope. On one horrible day, Mar. 8, Tiger sustained a $200 million loss, as a bet on U.S. Treasuries turned sour.
Nothing seems to have helped, not more analysts, not the addition of Morgan Stanley & Co. managerial whiz Lewis W. Bernard. Not even Stern, a prominent psychiatrist and management consultant, has restored the magic that is fast becoming a memory.
How did the best record in the world of investing turn so dreary? Getting the answer to any significant question at Tiger has long been nearly impossible, for that glass-walled perch on Park Avenue might just as well be one-way glass. Robertson rarely grants interviews, and former employees are afraid to speak about him, even off the record.
But the veil of secrecy has been lifted. BUSINESS WEEK obtained access to the inner circles of the Tiger organization–including its mercurial chief. Interviews with Robertson, along with current and former employees, revealed a fascinating, if unsettling, story of a complex man and organization. It is a story of bad choices, grave missteps in high-stakes currency and bond plays, and atrocious management–including the waste of the some of most brilliant analytical brainpower on Wall Street. Above all, it is the story of a man who rose to greatness–only to be foiled by his own overcontrolling management style and hot temper.
When Robertson began his climb to the top, he did so on the strength of his stock-picking prowess. He still employs some of the best analysts around. Whether they are used well is another matter. One clue can be found in the tale of a promising young analyst.
“We try to assimilate in these people [young analysts] the qualities that made Julian Julian.”
– Dr. Aaron Stern, a Tiger Director
Katrin Yaghoubi could hardly believe her good fortune. It was the middle of 1994, and Tiger was suffering–down 12% in the first quarter because of ill-fated currency bets. In her little corner of Tiger, though, it was raining money. Barely a month and a half into her career at Tiger, her first job on Wall Street, Julian Robertson, on her say-so, had bought 15% of a company! It was almost an anticlimax when, six months later, the stock, Canstar, went on to double.
Katrin Yaghoubi was an anomaly at Tiger–a woman born in Germany of Iranian parents working in a largely male, largely WASP outfit where Southern accents are dominant. Yaghoubi was introduced to investing just a few months before she was hired in mid-1994, as she was completing course work toward an MBA at Columbia University. She was in a class taught by James Rogers, the investor and commentator, when she caught the eye of Patrick Duff, a former Tiger analyst who was often invited to help with the class. That led to an introduction to Robertson, who hired her out of Columbia.
Yaghoubi discovered Canstar while still at Columbia. She came up with the idea not by a hot tip or by reading about it in a brokerage-house report–but by dogged research. She started by putting together a list of every public sporting-goods company. She talked to trade-magazine editors, store owners–anyone who knew anything about sporting goods. “I kept asking, `What’s the next big trend?’ They told me it would be roller hockey.” Yaghoubi then immersed herself in the roller-hockey world, even “interviewing kids in Central Park.” She soon found Canstar, which makes skates. The company boasted a healthy balance sheet and lots of insider buying.
This was an example of Tiger at its stock-picking best: a smart idea, grounded on exhaustive research, followed by a big bet. When Robertson is convinced that he is right, a former Tiger executive notes, “Julian bets the farm.”
Canstar was only the beginning. At Tiger, Yaghoubi had a string of winners, all found through the same rigorous legwork. She even used the Internet and online services. A chat lounge on CompuServe gave her negative information on another company–Franklin Quest. Further research showed that margins were under pressure, competition was mounting, and insiders were selling. On Yaghoubi’s recommendation, Robertson “pulled the trigger,” ordering a short sale.
Yaghoubi’s other short picks were similarly doped out in the Robertson manner. Bell Sports, Fossil, Arctco–all were shorted by him on her recommendation and blissfully tanked. Typical was Arctco Inc., a snowmobile maker. “I must have called every snowmobile dealer in the country,” says Yaghoubi. Researching a possible “long” pick, Avon Products Inc., she became an Avon representative. She would go to trade shows, and she subscribed to 35 trade journals. At Tiger, the resources were unlimited. “It’s all about ideas, new ideas. To survive at Tiger, you’ve got to generate ideas,” says Yaghoubi.
Recommendation after recommendation went on to perform handsomely. But soon, something started to happen. Robertson liked Yaghoubi’s picks, but more often than not he wouldn’t act on them. Tiger simply couldn’t amass a big enough position in them to make much of a difference in the huge portfolio. Robertson won’t even look at a stock unless he can take a $125 million long position or a $50 million to $70 million short position.
After a while, it became clear to Yaghoubi that her talents were best used elsewhere. So a few weeks ago, she left to join a smaller hedge fund more suited to her investment style. She was one of a succession of analysts–veterans and neophytes–who’ve passed through what is an ever-faster revolving door.
Yaghoubi’s picks were the kind of stocks that propelled Tiger when it was smaller. Tiger is just too big for small stocks nowadays. Yet Tiger is run just as it was when it was a small hedge fund buying–and shorting–mainly small stocks. There is one portfolio manager, one decision-maker: Julian Robertson.
THE INFORMATION MACHINE
“He can look at a long list of numbers in a financial statement he’d never seen before and say, `This one is wrong.’ And he’d be right.”
– a Roberstson associate who requested anonymity
It used to happen every day until 1993, when Robertson moved from the trading desk to his own office. On the screen were the prices of the stocks in Tiger’s portfolios–all 100 of them. Just the prices, and the changes for each stock. Tiger might own a million shares of one, 2 million of another. But that’s not on the screen. Only the stock symbols, their prices, and the change during the day.
Robertson would call out a figure. He had calculated, in his head, the total change in his entire equity portfolio, down to a fraction of a point. Inevitably he’d be right. “I’m pretty good mathematically,” says Robertson blandly.
Assimilating and sifting vast quantities of information is the Robertson forte. Robertson’s analysts give him ideas and data. He then makes the buy or sell decision–usually after checking and rechecking what they have to say. Other hedge- fund operators, however, have found they can’t run funds as one-man outfits–not when they grow to multibillion-dollar size. They are too large and complex–far more so than even the largest mutual funds. Some large hedge funds, such as Soros’ and Odyssey Partners, the money-management machine run by Leon Levy and Jack Nash, delegate decision-making power. Soros even let one of his top analysts–London-based macro guru Nicholas Roditi–run an entire fund under his watchful eye. Under Roditi, Quota fund more than doubled in value in 1995, far outpacing Soros’ flagship Quantum fund. Such independence is unheard-of at Tiger.
Size and centralization have clearly hurt Tiger. Another negative is that Robertson has pushed stock-picking even further into the background as macro bets on currencies and bonds have dominated Tiger. He no longer visits corporate managements, and most of his extensive travel during the year is spent educating himself about currency and interest-rate trends. It can be an exhausting pace.
On one recent visit to his office, Robertson was preparing for a tour of Frankfurt, Paris, Hong Kong, Bangkok, Kuala Lumpur, and Tokyo–all in two weeks. He prepares in the usual manner. Research and more research. Interrupting a conversation with a visitor, he takes a call from Hong Kong–Morgan Stanley’s former chief global investment strategist, David Roche. With Roche on the speakerphone, the discussion switches from stocks to the intricacies of Indonesian economics to the latest trading by another hedge fund in Hong Kong stocks. Indonesia intrigues Robertson, and so do the currencies of the southern Pacific Rim. The Thai, Singapore, and New Zealand currencies have great potential to appreciate vs. the yen, in his view. Robertson terms Indonesia “an interesting currency play.” And then there is Japan–“the most beautiful place to invest in the world,” he later remarks. “The worst companies sell at the best [price-earnings] multiples and the best at the worst multiples.”
The two men discuss possible contacts for Robertson in Hong Kong and Djakarta. Robertson plans to go from Frankfurt to Paris before jetting off to Hong Kong, but he was willing to return to Frankfurt if he could get in to see Hans Tietmeyer, president of the Bundesbank. Asked about Tietmeyer later, Robertson bristles. “George [Soros] walks in and says, `I need to see you,’ and they fall in line. He would have had the appointment with Tietmeyer lined up months ago.” As Robertson leaves on the trip, he still doesn’t know if Tietmeyer will see him.
“I think Julian’s competitive instincts come from the fact that he’s a North Carolinian. We’ve always been second fiddle, stuck there between Virginia and South Carolina.”
– a longtime Robertson acquaintance from North Carolina
It took quite a while for those competitive instincts to emerge. Robertson was from Salisbury, nestled between Charlotte and Winston-Salem. He likes to portray himself as a “typical small-town boy,” but there’s no doubt that he came from the right side of the tracks. His father, Julian Hart Robertson Sr., was an achiever in his own right–an Army lieutenant in World War I at 18, a college graduate at 19, then a fast-rising executive in the North Carolina textiles industry. “He was a tough, demanding father,” Robertson recalls. But young Robertson was an underachiever in high school and at the University of North Carolina, where he graduated with a degree in business administration. He was mediocre in pretty much all his subjects–including math. “A late bloomer,” as he puts it. “All my friends were like that, and they turned out all right.”
After a stint in the Navy, Julian Jr. moved to New York to join Kidder, Peabody & Co. as a sales trainee. Then came a long sojourn at Kidder–20 years as a stockbroker, becoming one of the firm’s top producers. He then was named head of the money-management unit, Webster Management. He left Kidder to start Tiger in May, 1980.
In the beginning, it was just Robertson and Thorpe McKenzie, a fellow Kidderite who soon went off on his own. The early numbers were brilliant–such as the 24.3% gain the Tiger fund recorded in 1981, vs. a 5% decline in the S&P. That was 19.4%, after the incentive fee–20% of profits and 1% of assets, which is standard for hedge funds.
Tiger remained a small operation through the 1980s–just a handful of analysts and Robertson. He was little known except in the gilded precincts of hedge funds. And he liked it that way. Like Soros and most other investors, he was caught short by the crash of 1987. But canny investments worldwide, including an early move into global stocks, kept Robertson’s performance glorious at a time when other money managers were suffering. In 1989 and 1990, Robertson flawlessly timed the soaring German stock market, and he went short the Japanese market in time for the crash there. By 1991, Tiger was fast approaching $1 billion (chart, page 73).
As Tiger grew ever larger, two things happened: Robertson began to focus on global stocks, and his temper, always looming in the background, became more and more a negative as the staff multiplied. It is a legendary temper–one that former Tigerites speak of with fear and awe. It is unpredictable, they say, and frightening. “Julian can be rational one minute and irrational the next,” says one former Robertson associate. “He would remember something that happened months ago and yell at you about it. He would turn blotchy red.” Robertson admits that he can lose his cool but says his relations with his “employees and peers” are good.
Back then, Robertson’s temper did not interfere with the only thing that really mattered: the numbers. They were terrific. Pay scales were skyrocketing. Then as now, Tiger analysts were paid a share of the 20% profit allocation. In 1993, the 80% gain in Tiger’s $3.7 billion in stock and macro portfolios resulted in profits of about $3 billion, of which about $600 million went to Tiger as a profit allocation. Former analysts say Robertson gets about 60% of the allocation. Robertson acknowledges that he gets about half of it. In 1993, that would have netted him an astonishing $300 million. (The numbers are skewed by the fact that the offshore Jaguar fund has a different fiscal year than the U.S. partnerships.)
In addition to the $300 million, Robertson would have picked up a share of the 1% management fee, not to mention his stake in the profits as a big investor in the Tiger partnerships. Robertson won’t say how much of Tiger he owns but acknowledges that his stake is substantial. If it’s just 25%, in 1993 that would have given him profits, on paper, of some $750 million. Added to his $300 million paycheck, that results in a gain to Robertson, in 1993, in excess of $1 billion.
Tiger analysts also raked in extraordinary amounts of cash. Back in the early ’90s, senior analysts took home upwards of 2% of the allocation, and even some promising junior analysts received as much as 1%–a cool $6 million for somebody just out of business school.
Such massive wealth was the lure of the macro era–the heyday of global bonds and currencies. It was macro that moved Tiger to the summit from which it was about to descend.
SCALING THE PEAK
“It is unfortunate that we have such a great fear of failure, because it is success that is far more dangerous to the human condition.”
– Aaron Stern, in his book ME: The Narcissistic American
In the macro world of the early 1990s, where $1 in assets could often support a $100 position, there was only one true star–George Soros. Soros was the master at translating broad-brush economic trends into highly leveraged, killer plays in bonds and currencies. Robertson had no background in macro. So he reached out, as he often does, to Morgan Stanley.
Robertson had long had his eye on David Gerstenhaber, a London-based economist and rising light at Morgan. He met Gerstenhaber at a Morgan Stanley conference in the Florida Keys in 1987, and in the succeeding years Gerstenhaber was often called by Robertson for advice, mainly regarding the Japanese market. It was a typical Robertson head-hunting stratagem. “I didn’t realize it at the time,” Gerstenhaber recalls, “but Julian was testing me.” He passed the test.
The Gerstenhaber-Robertson relationship was lucrative–and stormy–from the start. It was early 1991, and the conventional wisdom held that the Persian Gulf war would bring about another energy crisis. Gerstenhaber was bearish on oil. “I was dead convinced that every rust-bucket tanker was full of oil,” says Gerstenhaber. He constructed a position, using derivatives, in which Tiger would short oil prices while limiting risk–as Robertson wanted. Still, the two men were hardly the best of buddies. Gerstenhaber, like Robertson, was no shrinking violet. Robertson does not exactly wax nostalgic about their collaboration and minimizes Gerstenhaber’s role. “He was the implementer,” says Robertson. “Decisions of any real size were made by me.”
That’s undoubtedly true, for only Robertson ever made any important decisions at Tiger. If anything, his urge to control seems to have grown through the years–to the point of intervening, one ex-Robertson associate insists, in the techniques used by window washers outside the building: “I think they were going left to right and he felt they should use the squeegees up and down.” That is hotly denied by Robertson.
Gerstenhaber and Robertson–two strong, controlling personalities–were destined to collide like two freight trains on the same siding. And they did. But it was a grand partnership while it lasted. By 1992, when the portfolios charged ahead 34% before fees, about two-thirds of that sum came from macro bets. In 1993, when all the major hedge funds scored big from the demise of the European currency system, macro was Tiger’s money machine. Of the 80% gain before fees, 48% came from macro and 32% from stocks.
Given his tense relationship with Tiger, it was no surprise when Gerstenhaber left in mid-1993 to set up his own hedge fund, Argonaut. He started with 50 times the $8 million that Robertson began with. In 1994, Argonaut tanked. But in the beginning at least, Robertson admits, “I was a little jealous.” How did Gerstenhaber get all that money? Investors were flocking to Tiger as well as Argonaut and other hedge funds to make currency and bond bets. It was a decision they would soon regret. And few have more to regret from the reversals in macro than Julian Robertson.
FALL OF THE WIZARD
“The best thing we can say about the first quarter of 1994 is that it is over.”
– Julian Robertson, in an Apr. 8, 1994, letter to investors
When Gerstenhaber left–taking his key people with him–Robertson became his own chief macro analyst, crossing the globe feverishly in search of macro ideas while he embarked on an intense hunt for a new macro analyst. As always, Robertson was accompanied on these treks by John Griffin, his chief aide. Griffin, who turned 29 in 1993, was one of a handful of key aides on whom Robertson began to rely increasingly–sparking the jealousy of less favored analysts.
But Robertson recognized that he needed another Gerstenhaber. He again reached across the Atlantic for macro brainpower–a Scottish-born global economic strategist at Goldman, Sachs & Co., David Morrison, and Goldman bond market strategist Jeremy Hale, both in London. Morrison was signed on at the beginning of 1994 to head the macro operation. At 41, Morrison was a comparative geriatric by Tiger standards, but as a dedicated auto racer he reflected the jock ethos that was ingrained in the Tiger corporate culture. In the typical Robertson manner, he had scoped out Morrison before hiring him–meeting with him three to four times a year and chatting often by phone.
So they were pals–until he was hired. Almost immediately, as with Gerstenhaber, conflict began. For starters, Morrison was a Londoner, and he wanted to stay there. Robertson wanted him in New York. Morrison prevailed, but the argument was just the first of a series–over far more important things than who would live where.
As the year began, Robertson was bullish on the dollar and bearish on European interest rates. He was long in the Hong Kong, Korean, Swiss, and British stock markets and short in Japan, France, and Germany. Morrison felt quite differently about pretty much everything. “We didn’t expect that Julian would jettison his views in favor of ours,” says Morrison. And he didn’t. “Julian is strong and expressive,” Morrison says, diplomatically.
By the end of the first quarter of 1994, the damage had already been done. Robertson was down 12% and never recovered, mainly due to misbegotten macro bets. By yearend, Tiger was down 9.3% while the S&P 500 was up 1.3%. Robertson had failed at one of the basic functions of a hedge fund–to provide a cushion against a weak U.S. stock market. The suffering continued in 1995. Tiger’s positions in global equities were up just 10%. In the U.S., with the S&P up 37%, Robertson was up just 7%. The reason was telling for this onetime ace in U.S. equities. In a letter to investors early this year, he blamed the disaster in U.S. stocks “to our low net [long vs. short position] exposure and our less than stellar stock-picking.”
Macro continued to generate mainly grief last year, as Robertson’s bickering with Morrison continued. A play on the weak yen counterbalanced losing positions but lifted Robertson’s assets by only six percentage points. He profited from German, U.S., and Spanish bonds but canceled out gains by being short Japanese and Swedish bonds. Stock positions in Britain, Ireland, India, and Canada were all losers.
As the dreary performance dragged on, former employees say Robertson became less accessible to his army of analysts. Opportunities were sometimes lost. “By the time you got Julian’s attention,” one ex-analyst notes, “the buying opportunity could have ended.”
Another byproduct of Tiger’s decline was the departure of investors. One former Robertson associate notes that investors, particularly Europeans, left en masse early in 1994 and that the departures continued at a slower pace in 1995. Tiger is mum about withdrawals, saying through a spokesman that they are “not substantial given the size of the asset base.” However, the magnitude of the departures can be estimated from the asset numbers by comparing the size of the asset base and the performance of the fund. All told, some $800 million was pulled out of Tiger in 1994 and 1995.
The sour times weighed heavily on Robertson. Impulsive and disorganized, he was hardly a textbook manager in the best of times and could become positively unglued in times of crisis. One former Tigerite remembers the occasion, around the time of the 1987 crash, when Robertson felt he needed to reduce staff. Pretty much at random, he pointed at a group of people and ordered them fired. They were consultants from Morgan Stanley and didn’t even work for him. That is denied by Robertson.
Meanwhile, the revolving door of investment pros picked up steam through the 1990s. The stress of working at Tiger–exacerbated by Robertson’s violent temper–was one reason. So was the fact that analysts simply did not have the ability to establish a track record by running a portfolio at Tiger. The departed included experienced veterans and promising neophytes. Out went Arnold Snider, star pharmaceuticals analyst, and Lou Ricciardelli, a former Morgan Stanley trade-operations expert who straightened out Tiger’s problem-plagued back-office systems. Out went analysts Lee Ainsley and Patrick Duff and Larry Bowman and Bob Bishop and trading chief Tim Henney and…the list goes on and on. One unexpected loss was Griffin, who was widely viewed as a possible successor to Robertson. Griffin wouldn’t comment, but his friends say that he, too, grew tired of working under the shadow of the boss, and–though he had some trigger-pulling ability–of not being given enough autonomy.
As the old have gone and the new have arrived, Robertson has come to rely ever more heavily on a handful of key analysts and advisers–and at the top of the list is Dr. Aaron Stern.
“Dr. Stern told me that Julian was very excitable, that he’s got a temper, and that I shouldn’t take it personally.”
– a former Tiger employee
Hedge funds are Wall Street’s last bastion of rugged individualism, with even the largest tending to eschew the trappings of management. But Tiger needed management, and structure. Or to put it another way, Julian Robertson needed it. “If something happened and he needed someone to do something, somebody would walk by and he’d grab him and say, `Handle it,”’ says one former analyst. “It didn’t matter who it was. It could be the plumber.”
Enter a management committee and a board of directors–and Stern. Stern is a Tiger consultant and board member and according to Robertson, also a member of the Tiger management committee. (That is denied by Stern, who says he attends committee meetings but is not a member.) A sharply dressed man of about 70, Stern is a Freudian-trained psychoanalyst who, in the early 1970s, headed the movie-rating unit of the Motion Picture Association of America.
How can a psychiatrist help Tiger? Stern says he does not practice psychiatry at Tiger, but that he “meets with people on the analytical side on the infrastructure of Tiger and the recruitment process,” as well as interviews job applicants. Robertson says Stern was brought in, a couple of years ago, to deal with outplacement counseling of some bright young analysts who had to be let go. The aim, he says, was to bolster the self-esteem of young people who had never experienced failure.
But former employees say that if anyone receives counseling from Stern, it is Robertson. They maintain that Stern’s duties include calming down Robertson when he has a tantrum and informing Robertson of employee sentiments about him. Two former well-placed Robertson associates maintain that Stern was brought in at Lewis Bernard’s insistence after a meeting at which Robertson had a violent tantrum. The allegations are hotly denied by Robertson, Stern, and Bernard. Stern says that while he counsels Robertson after outbursts, he does so as a “friend,” not as a therapist. He denies that he has ever violated employee confidences and says that such allegations are sour grapes by disgruntled former employees.
Whatever Stern’s role at Tiger, there’s no question that Robertson’s hot temper and controlling management style have weighed heavily on the company. Smart management has become just as important as stock-picking–and it just isn’t there. As the experience with Morrison proves, not even the smartest people can be of much use if they aren’t listened to.
Has Robertson considered giving more authority to his people to act on their own ideas? “We’ve thought about it,” says Robertson. “There may be a time when we go more toward that direction.” But not now.
“There are not a whole lot of people equipped to pull the trigger.”
– Julian Robertson
Robertson is back from his tour of Europe and Asia. At his side was Chris Shumway, another bright, young, and trusted aide–yet another young John Griffin, so crucial that Shumway’s desk is in a corner of Robertson’s office. Robertson never got in to see Tietmeyer. If it hurts, it doesn’t show. Overall, he says, the trip was “fantastic.” While he was gone, the press was alive with talk of the “carry trade,” in which hedge funds–including Tiger–supposedly borrowed yen to buy U.S. Treasuries. Robertson is unimpressed, contemptuous. “We’re not borrowing from the Japanese banks to fund our bonds,” says Robertson. No, but he has been short the yen for a long, long time, and he does own U.S. Treasuries–and in quantities far larger than the $3 billion suggested by the press. His short-yen, long-treasuries position was a major contributor to the gains in early 1996–and as happens with highly leveraged bets, this one turned sour pretty quickly. Tiger was up 17% by the end of January. By Mar. 13, it was up only 10%, with the worst damage done on Mar. 8–the bond-market debacle.
Robertson blushes, his mood visibly darkening, when he is told of the negative comments concerning his temper, his overcontrolling management style, and particularly his relationship with Stern. He presses a reporter for the names of former employees who provided information, volunteering names–as does Stern–of former employees who might have an ax to grind against him. One, he noted, was pressing a sexual harassment case against Tiger. He observes that another, a former employee whom he suspects has spoken against him, was a “divorcee” who kept “smoked salmon in her desk.” He says he was not, for the most part, upset by the employee departures. Volunteering an example, he notes that one prominent ex-analyst was “asked to leave.”
Robertson softens when the conversation turns to his boyhood in North Carolina and his personal life. Tiger, he says, was named by his son Spencer, when he was a small boy. Robertson reels off the names of his children: Julian III, Spencer, and Alexander. Spencer? One ex-employee says that two of his children were named Julian. Robertson, reluctantly, concedes that point. “His name is Julian Spencer. Spencer was my mother’s maiden name, and my father thought there should be another Julian in the family.”
Robertson’s parents only recently passed away, his father just a year ago. “Maybe he was too controlling,” he says of his father. “I’ve tried not to be too controlling. I’ve tried not to do that with my children.” He has not, he says, “left them with a legacy,” and has not tried to encourage them to join the business.
Perhaps that’s for the best. But Robertson has another family–his once glorious hedge-fund empire. It is a dysfunctional family of brilliant analysts, headed by a master stock-picker. If only it worked, it would be a monument to greatness–and not to the fall of the Wizard of Wall Street.
By Gary Weiss in New York
12/17/97 Editor’s Memo
In a joint statement, Julian H. Robertson, founder of Tiger Management Corporation, and Business Week announced that they have reached a settlement and Mr. Robertson will withdraw his libel suit against Business Week. No money or other financial consideration is involved. Business Week acknowledged that predictions regarding Tiger’s investment performance included in its cover story of April 1, 1996. “The Fall of the Wizard of Wall Street,” with the sub-headline “Tiger: The Glory Days are Over,” have not been borne out by Tiger’s subsequent investment performance, which included a 48% gain before fees (38.4% after fees) in 1996 and a 67.1% gain before fees (53.7% after fees) through December 11, 1997. Business Week acknowledges that these results under Mr. Robertson’s management, which far exceed market averages and the performance of other leading hedge funds, were superior by any measure.
12/17/97 Joint Press Release
In a joint statement, Julian H. Robertson, founder of Tiger Management Corporation, and Business Week, a publication of The McGraw-Hill Companies, announced today that they have reached a settlement and Mr. Robertson will withdraw his libel suit against Business Week. No money or other financial consideration is involved. Business Week acknowledged that predictions regarding Tiger’s investment performance included in its cover story of April 1, 1996, “The Fall of the Wizard of Wall Street,” with the sub-headline “Tiger: The Glory Days are Over,” have not been borne out by Tiger’s subsequent investment performance, which included a 48% gain before fees (38.4% after fees) in 1996 and a 67.1% gain before fees (53.7% after fees) through December 11, 1997. These performances far exceed market averages and the performance of other leading hedge funds.
In the article, Business Week described how, after many years of stellar returns, including an 80% gain before fees in 1993, Mr. Robertson’s Tiger Management delivered below market average results in 1994 and 1995. While the article also noted that Tiger was beginning to do better in early 1996, Business Week said that the “revival has all the makings of a bump on a downward slope.” Business Week acknowledged today that Tiger’s 1996 and year-to-date 1997 results, under Mr. Robertson’s management, were superior performances by any measures.
Among this the article’s statements with which Mr. Robertson took issue was the assertion that he no longer “visits corporate managements, and most of his extensive travel during the year is spent educating himself about currency and interest rate trends.” In objecting to the article, Mr. Robertson provided Business Week with a list of specific meetings with the managements of more than 55 companies on three continents in the year immediately preceding the article. Robertson’s list reflects meetings with corporate managements during Mr. Robertson’s travels abroad and at Tiger’s offices in New York. Based on that list, Business Week acknowledges that Mr. Robertson had not stopped meeting with corporate managements.
Both sides have agreed to disagree on a number of statements in the article, including one statement that was particularly objectionable to Mr. Robertson. In discussing his management style, the article referred to a “former Tigerite” who is reported to have said that around the time of the 1987 market crash, “Pretty much at random, he (Mr. Robertson) pointed at a group of people and ordered them fired. They were consultants from Morgan Stanley and didn’t even work for him.” Mr. Robertson denies the incident ever happened and noted that at the time of the 1987 market crash the Tiger organization consisted of no more than 17 people, all known to him personally. Further, both Mr. Robertson and Morgan Stanley state that there were no Morgan Stanley consultants at Tiger at that time. Business Week states that it accurately quoted its source who was well-placed and who spoke on conditions of anonymity. Business Week has declined to disclose the individual’s identity. For his part, Mr. Robertson stated that all of the individuals who worked at Tiger at that time (with the exception of one who is deceased) have specifically denied to his counsel that such an incident ever occurred. Because the alleged incident occurred some ten years ago, both sides have agreed to drop the matter.