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January 1, 2005

Too Big for His Boots?

By Gregory Bresiger

Also in this article

Julian Robertson

A Tiger in the Land of Bulls and Bears

by Daniel A. Strachman

(John Wiley & Sons, New York, 270 pages) $29.95

Oh, how the mighty have fallen! That should be the sobering lesson for everyone who achieves success running a hedge fund complex. This compelling work details the rise and fall of one of the giants of the business, Julian Robertson. His famed Tiger Fund fell after posting great returns.

So the great Julian Robertson went from being the darling of the investment world to being the goat of the month in the business press.

Robertson went from a BusinessWeek journalist calling him "the world's greatest investor" to being accused by the same publication of having lost interest in stocks and analyst recommendations. Lawyers were later called in.

Indeed, a fascinating part of this book covers Robertson's lawsuit against BusinessWeek, which, in an unflattering portrait, claimed that he had stopped meeting with corporate management.

In a settlement of the lawsuit, BusinessWeek acknowledged, "that Mr. Robertson had not stopped meeting with corporate managements." (page 148). By the way, a few years after the settlement, Robertson closed up shop. It had been quite a ride.

Robertston's famed Tiger organization started with just $8 million in assets under management. It eventually accumulated $20 billion. But its style of hedge fund investing - value at a time of growth/Internet mania - went out of favor.

Maybe the credo of this alternative investment business should also be, "all glory is fleeting" or "how quickly we all forget." Nevertheless, this book makes one want to remember the highs and lows of a fabled career.

There is a natural curiosity among many people - the fascination with knowing why and how someone as brilliant as value investor Robertson could slip from the pinnacle of investment greatness. This author capably answers these questions.

Robertson's biggest faults, the author tells us in this well-written and documented work, were that his funds lost much of their nimbleness when he achieved incredible success. The funds became too big and it later turned out that Robertson was right too soon. Of the latter, it seems clear that Robertson's long range market forecast of a bubble was not believed until it was too late to do any good. Of the former, Robertson's admissions should serve as a warning to the hedge fund industry. This is an industry that is suddenly becoming very popular and has come into the investment mainstream. And it is now attracting record new cash flows.

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"Today," Robertson said toward the end of his Tiger tenure, "all of my people have left, and they have realized the mistake that we made was that we got too big. I always had the feeling that if you got the talent to keep up with assets, then it did not make any difference how big you got.