Soros Funds Cut Back European Operations

by Carla Johnson, Investors Offshore, London

29 November 2002

Soros Fund Management, which is still advised by fabled hedge fund operator George Soros, although he no longer runs it, is cutting back heavily on its European operations and is moving some remaining staff to New York.

The group has a total of US$11.5bn under management, of which about $1bn is thought to be invested in European hedge fund strategies. The group's flagship Quantum Endowment Fund is down 0.82% this year to date, compared with average performance of plus 1% from top hedge fund indices.

It isn't thought that the group will reduce its European exposure, although it has tended in recent times to prefer private equity and property to classical hedge fund management.

Billionaire George Soros retired from hedge fund management more than five years ago, but still advises the funds he once led, and has a high public profile for his sometimes maverick views on world economic trends.

Last summer, Mr Soros said he wouldn't be surprised if the dollar loses a third of its value during the next several years. He also said that markets could go much lower if key governments, such as the US administration, don't take the right policy steps.

Mr Soros said that the news of corporate misdemeanours in the US has frightened off the foreign investors who have been financing the US trade deficit. Trends in currency markets tend to last several years and involve major swings, he said, so a drop of around a third in the dollar's value from recent levels "would not be unprecedented."

The danger Mr Soros sees is that the dollar's fall will frighten US consumers. But he is 'agnostic' on whether consumers will stop spending, and recommends keeping a close watch on such things as US auto sales, the housing market and unemployment.

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