Julian H. Robertson Jr. (BSBA ‘55) is chairman and CEO of Tiger Management LLC. From initial capital of $8 million, Robertson built Tiger into the world’s largest hedge fund with capital of more than $23 billion. Tiger compounded at a gross rate of 31.5 percent between its founding in 1980 and its closing in 2000.
Robertson also trained and developed a generation of “Tiger Cubs,” a cadre of analysts and portfolio managers who have become some of today’s most successful hedge fund managers. Today, Robertson maintains Tiger to manage his own investments and to seed independent hedge funds. Robertson spoke to UNC Business magazine about the recent recession and his investment philosophy.
What do you think were the core causes of the recession?
The real thing that caused the recession was a tremendous housing bubble created by people who had goodwill in their hearts and who thought it was really good for every family to have their own home. Unfortunately, it kept on going and going, and housing prices continued going up to unrealistic levels, and everyone encouraged that.
In the real world, you have to save a lot of money. You can’t just borrow and keep borrowing without eventually running into problems. People were bailed out with easy money and various vehicles, so there was no penalty to pay. People eventually came to the conclusion that they assumed no risk when they borrowed money.
What is key to your successful hedge fund investing?
I think the hedge fund business is the antithesis of Major League Baseball (MLB). In MLB, you can only make money if you play in the big leagues. You can bat 400 playing for the Durham Bulls, but you will not make any real money. If you play in the big leagues, even if your batting average isn’t terribly high, you still make a lot of money.
Hedge funds are the opposite. We are paid on our batting average. It is easier to create the batting average in a lower league rather than the major league because the pitching is not as good down there.
That is consistently true; it is easier for a hedge fund to go to areas where there is less competition. For instance, we originally went into Korea well before most people had invested in Korea. We invested a lot in Japan a long time before it was really chic to get in there.
One of the best ways to do well in this business is to go to areas that have been unexploited by research capability and work them for all you can.
You are known for being extremely successful at spotting and developing talent. What philosophy or strategy did you use to find and cultivate the Tiger Cubs?
We’ve had a lot of successful people who have come through this operation. We have tried to develop a test that helps us find good people who embody the same sort of attributes that our successful people have had in the past. It is extremely important to have a continuing flow of young people, which means that you’re going to lose a certain amount of people. A lot of people in this business aspire to develop their own fund. This outflow of talent creates slots for new people. Obviously, that isn’t all bad for the company.
What makes a good portfolio manager?
They have to be smart, honest and have the courage of their conviction. In addition to that, we have found that competitiveness is an important factor.
What are the most important characteristics or traits for successful leaders on Wall Street today?
Honesty and smarts. Wall Street and the rest of the world are looking for people who want to make this a better place than it was when we arrived. There is a tremendous awareness of that on Wall Street. The press is very critical of Wall Street. But I look at people on Wall Street and what they have done, and I am very proud of this industry and the people in it. That is a mark of leadership on Wall Street.