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Julian, the legendary investor.Julian Robertson Six

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Julian, the legendary investor.Julian Robertson Six


After closing Tiger Fund, Robertson began a series of reflections.

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The Reasons of Tiger Fund’s Success and Collapse (Part 2)

After reflection, Robertson believes that Tiger Fund is too large. “The key to the hedge fund business is success breeds success. We’ve been doing great, so our investors spread the word and tell their friends and colleagues that this is how we grow.”

He thinks Tiger can add staff as it manages more money. But he later realized that the idea “would work in theory, but not in practice”. The bigger the Tiger Fund, the more stocks it has to buy to influence the portfolio. At its worst, Robertson needed to put down $200 million in just 1% of the portfolio in order to make the stock position work. And at that time, there weren’t many stocks that would allow you to hold a $200 million position with liquidity, so that was a real problem for Tiger. Liquidity, size and investor withdrawals, among many other factors, contributed to Tiger’s collapse.

Robertson believes that the success of Tiger Fund lies in his team’s “firm belief, only buying the best stocks and shorting the worst stocks”. However, now that the market is “irrational,” this belief no longer seems to apply. “In a rational environment, our strategy works well,” he said. “But, as we know, in an irrational market, that logic doesn’t matter; payoffs and considerations, in the face of the Internet and inertia, are only at secondary status.”

He compared the market environment at that time to a “pyramidal pyramid scheme” that was doomed to destruction. Like Buffett, Robertson believes that the tech mania is at the root of all investing mistakes. This is the same as the Dutch tulip craze in the early years, the only difference is that now it is the world of the Internet and characters.

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History proved Robertson right — weeks and months after his decision to close Tiger, tech stocks crashed and many investors suffered significant losses. Nasdaq’s market value has shrunk by nearly 80% in less than three years; the Dow Jones Industrial Average hit a record high of 11,722 points in January 2000, closed at 10,453 points in 2003, and fell to 10188 points.

The end of the Tiger Fund became the tears of the times, while Buffett in the same period has been brilliant so far. This is related to the different investment philosophies of Robertson and Buffett.

Robertson’s investment strategy is “buying the best, shorting the worst”, but Buffett has always been “buying the best”, but not “shorting the worst”.At that time, Buffett was not interested in hyping Internet stocks and technology stocks in the market, but he did not sell short. (to be continued)

(Arthur)

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