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A Tale of Two Investors
If Peter Lynch represented the rise of a new generation, then Julian Robertson proved that it's never too late to reinvent yourself and achieve greatness
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Frederik Gieschen’s excellent tribute to the late Julian Robertson inspired me to learn more about the man who created the world-famous Tiger Management hedge fund.
While researching his prolific career on Wall Street, I was struck by this passage from a Forbes magazine profile (1991):
No boy genius, Robertson started his Manhattan-based Tiger Fund, his flagship partnership, when he was 48 years old. Peter Lynch, the now retired master of Fidelity’s Magellan Fund, hung up his spurs last year at 46, unwilling to subject himself to the continuing stresses of big-time money management.
That juxtaposition intrigued me.
Here were two contemporaries who made their marks on the investing world at two very different stages of their lives.
If Lynch represented the rise of a new generation — the precocious prodigy who dominated the money game in his thirties and cashed out well before fifty — then Robertson proved that it’s never too late to reinvent yourself and achieve greatness.
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Julian Robertson 🐯
After two decades spent totally immersed in the market, Julian Robertson needed a break.
So, in 1978, he and his family packed up for New Zealand — where Robertson hoped to pen the great American novel far from the hustle and bustle of Wall Street.
(That begs the question, of course, whether or not it would count as the great American novel if it were written half a world away…)
But, as it turned out, the solitary drudgery of writing didn’t suit Robertson and his novel fell by the wayside. He spent a year enjoying the natural beauty of New Zealand, recharging his batteries, and then returned to New York City ready to make his mark.
“I was looking for somewhere which had the greatest geography in the world,” Robertson [said] of the move that kicked off a 40-year love affair with the country. “It was between the island of Kauai in Hawaii and New Zealand and I thought New Zealand may be a little better because it was not part of the United States. And I had a great wife who was willing to do it. We made the trip and loved every minute of it.”
At the age of 48, Robertson created Tiger Management, a hedge fund named after his penchant for calling people “Tiger” if he couldn’t remember their name.
Tiger took the Street by storm with a 54.9% gain in its first year and eventually ranked among the largest hedge funds in the world. Robertson’s long-short method, in which he held long positions in favored companies and sold short those he doubted, grew Tiger’s assets under management from an initial $8 million to over $20 billion.
The not-so-secret sauce, though, was the prodigious collection of analyst talent that Robertson painstakingly assembled at Tiger.
In an interview with Columbia Business School in 2012, he sang the praises of his many young proteges — and the impact they had on his own performance and investment philosophy:
“I started at the right age, certainly. But what really made me was the realization that I could hire really good young people. When we started Tiger Management, I did that.”
“It was sort of a melting pot. I was so much older than they were, so they had to have a father-like opinion of me. They thought I had a unique touch or something.”
“Our young people were really great. And good ones begat even better ones — even today, we still do! So I’d say the success really belongs to the young people who worked here. John Griffin, Andreas Halvorsen, Lee Ainslie, and probably the greatest analyst of all time, Steve Mandel.”
“We had fantastic analysts and I found I could count on their earnings projections. So I turned from a cheapskate investor, one who was focused on low multiple stocks, to one interested in real growth stocks.”
As Gieschen also notes:
Robertson … built his organization to suit his strengths. He wanted to hire the best analysts for deep research and use his own network to cross reference their work and source new ideas. Much of his day was spent on the phone with executives, analysts, and peers.
It all paints a picture of a man who, perhaps owing to his “late” start with Tiger, felt comfortable and confident enough to share the responsibility — and credit — with those who worked under him.
And, if not for this focus on bringing in and developing the best young talent, Robertson’s story might have ended on a sad note.
During the dot-com bubble of the late 1990s, Tiger hit the skids as internet and tech stocks rocketed to the moon and Robertson’s value-based approach fell out of favor. He refused to indulge in the speculation and mania that bewitched Wall Street — which tanked Tiger’s results and forced the fund to close in 2000.
(A bad bet on the yen in 1998 didn’t help, either.)
He broke the bad news in a letter to investors:
There is no point in subjecting our investors to risk in a market which I frankly do not understand. We have seen manic periods like this before and I remain confident that despite the current disfavor in which it is held, value investing remains the best course.
Even though Robertson was right on the merits — and correctly judged the era as an unsustainable bubble — he bowed out rather than risk any more of his investors’ capital.
Reminiscent of the old John Maynard Keynes line: “Markets can remain irrational longer than you can remain solvent.”
So it went for Julian Robertson and the Tiger Fund.
But, rather than being defined by this cruel twist of fate, Robertson secured his legacy by continuing to nurture the next generation of investing talent.
Where once he mentored them under the roof of Tiger, he now provided seed money to Griffin, Halvorsen, Mandel, et al. as they spread their wings and started funds of their own.
Out of the ashes of Julian Robertson’s Tiger Fund rose the Tiger Cubs.
The younger Peter Lynch, on the other hand, attacked the market as something of a lone wolf.
He initially joined prestigious Fidelity as a summer intern during college, before being brought on full-time in 1969 as a textile and metals analyst. Then, at the age of 33, he was handed the keys to the Magellan Fund.
When Lynch took it over, Magellan was “a small aggressive capital appreciation fund” with $20 million in assets. Not exactly the shining star in the Fidelity firmament.
Lynch used only two research assistants — “one to collect Wall Street news and attend company presentations, and the other to call companies and go to research meetings” — and preferred to handle everything else himself.
He combined dogged personal research — visiting hundreds of companies each year — with a common sense appreciation for opportunities right under his nose. He bought Dunkin’ Donuts because he liked the coffee there. And he made a killing on Hanes because his wife went crazy for L’eggs pantyhose when that came out.
(Reminder: Lynch NEVER recommended blindly buying stock in your favorite company. Just to use your personal preferences and observations as a jumping off point for further research.)
Lynch on his indefatigable approach with Magellan:
Taco Bell was one of the first stocks I bought. [Other] people wouldn’t look at a small restaurant company. I think it was just looking at different companies. I always thought if you looked at ten companies, you’d find one that’s interesting. If you’d look at twenty, you’d find two. Or, if you look at one hundred, you’ll find ten. The person who turns over the most rocks wins the game. That’s always been my philosophy.
And, at Magellan, Lynch turned over a lot of rocks.
At one point, the fund had more than 1,400 holdings.
Eventually, though, the 80-90 hour work weeks pushed Lynch to the brink of burnout.
“I have a very small transmission,” he said. “My gear box has two speeds — off and overdrive.”
Lynch couldn’t stay in overdrive forever, so he decided to step back from Magellan. In all, he ran the fund from 1977 to 1990 and racked up an incredible 29.2% compounded annual return over that period.
While Lynch thrived as a go-it-alone fund manager, he embraced the role of educator and mentor in retirement. He worked directly with all of the new stock analysts hired at Fidelity, offering advice and guidance as they took their first steps into the world of professional investing.
He didn’t forget the individual investor, either. Lynch authored three books that distilled a lifetime of his wit and wisdom into understandable and actionable lessons. They’re all worth a read.
Julian Robertson agreed, recommending them to anyone hoping to learn more about the market: “Peter Lynch’s books have some great insights and would be great for anyone to read.”
Circling back to Julian Robertson’s sabbatical in New Zealand — and his failed attempt to write the great American novel — I think the legendary investor found an even better way to make an impact on the world.
By hiring, developing, empowering, promoting, and supporting young talent — who became known as the Tiger Cubs — he’s made the financial community a much more vibrant place.
The Tiger Cubs, from Steve Mandel to Philippe Laffont to Andreas Halvorsen (and many more), learned their craft at the feet of Robertson and then received a helping hand when it came time for them to strike out on their own.
“In a weird way, Julian Robertson touches trillions of dollars of assets under management because there are so many people who worked for him directly [or] indirectly,” said Daniel Strachman, author of a Robertson bio.
Little did he know, back in New Zealand in 1978, that the story he would one day write would be that of the Tiger Fund — or that his young proteges, the Tiger Cubs, would keep adding new chapters long after he was gone.
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Disclosure: This is not financial advice. I am not a financial advisor. Do your own research before making any investment decisions.