Soros Takes A Back Seat As New 'Conservative' Fund Is Unveiled

Lisa Ugur, Tax-news.com, London

23 May 2000

The end of an era is nigh. Following the resignation of a number of senior-level managers and the flight of a considerable sum of investors' cash, the legendary financier George Soros has announced that he plans to withdraw from the hands-on management of his vast (and risky) hedge funds and has unveiled a new, more conservative investment style to knock out steady returns rather than the spectacular ones synonymous with Soros.

Announcing that from July 1 his Quantum Emerging Growth Fund would be merged with the Quantum Fund to create a new US$6.5 billion fund, the Quantum Endowment Fund, Soros (dubbed in 1992 "the man who broke the pound" after he bet against the pound and helped force Britain's exit from the European exchange rate mechanism) said that he had lost the magic touch which had made him possibly the world's most successful investor. Soros said 'I think I lost my touch some time ago. I'm like an ageing boxer that should not go into the ring.'

The new fund has come about after weeks of turmoil that began when two senior managers, Mr Stanley Druckenmiller and Mr Nicholas Roditi, left in April. Since March, assets in Mr Soros' funds have dropped to $US11 billion from $US19 billion as investors withdrew and technology stocks fell. Of the crisis in the so-called new economy stocks, Soros said 'the bubble has been pricked.'

The new fund, which Soros has dubbed 'a structure that will last beyond my lifetime', will seek lower returns and will be run in part by outside money managers, although it has emerged that Soros' son Robert will take a more active role in his father's investment empire. Quantum Endowment will employ less leverage than previous funds - about 33% of equity, compared to about 100% previously, according to George Soros. It will have assets under management of about $US11 billion, divided among four funds, including two specialising in real estate and private equity.

The new fund will continue to make macro investments, which are leveraged bets in markets such as currencies and interest rates, but will scale down to a size that allows it to operate more efficiently. Soros said 'We are not giving up on macro, we will have a macro team that is looking for those opportunities. This has one big advantage - we will be less visible in the market. The perception was that I could move markets and that was to my benefit. The fact is that I can move markets but it is to my detriment.'

Soros is plainly happy to be stepping down and handing over the reins to his son and other managers, saying ' He (Robert) is the power behind the throne. The less I have to do the better. I am working furiously because I am furious that I have to work.'

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