Tiger Management's Julian Robertson: Hedge funds are facing the most challenging time ever

Robertson also says he won't vote for Trump and will pick the Libertarian party instead

Sep 28, 2016 @ 10:14 am

By Bloomberg News

Hedge funds are facing the most challenging time Tiger Management's Julian Robertson said he's seen in an investing career spanning several decades, and the industry pioneer cautioned that their days of charging hefty fees may be over.

“That type of business hasn't worked lately, and it's a tough business,” Mr. Robertson, 84, said Tuesday on a prime-time edition of Bloomberg Surveillance in New York. “It's tougher to be a hedge fund investor than ever before.”

Mr. Robertson, who founded Tiger in 1980 and turned it into one of the world's largest hedge funds, said ultra-low interest rates and swollen stock-market valuations are crimping returns for the managers, whose portfolios are designed to outperform during a downturn. The $2.9 trillion industry, which returned 3.5% this year through August, has underperformed the S&P 500 index every year since 2008.

(More: Hedge funder calls the bond market the mother of all bubbles)

Hurt by the lackluster returns, the industry is struggling to justify its traditional payment structure of an annual management fee of 2% of assets and a performance fee of 20% of gains. A survey released last week by Preqin Ltd. found that 73% of institutional investors said management fees need to fall further over the next year, and more than half said performance fees should drop.

“I don't think 2 and 20 is sacrosanct,” said Mr. Robertson, who has run his own money since he returned clients' capital in 2000. “There's a distinct drift occurring in the fee structure.”


Still, investors should maintain a portion of their portfolio in hedge funds to help protect against a bubble that's grown in equities because of the Federal Reserve's decision to maintain historically low interest rates, said Mr. Robertson. Once it bursts, he expects real estate will also be hit.

Fed Chair Janet Yellen “is just unwilling to see the American public take any pain at all and because of that I think she's creating a serious bubble where serious pain is coming,” he said. “If we have that bubble burst, you're not going to make any money in the stock market unless you're short and unless you're in some sort of hedge fund.”

While the billionaire also cautioned that young job-seekers should avoid industries that have become overly popular like hedge funds, he said his practice of seeding a newer generation of managers — which he's done since opening his family office — is still one of his favorite things to do. The managers, nicknamed “Tiger Cubs,” include Chase Coleman at Tiger Global Management, Stephen Mandel at Lone Pine Capital and Lee Ainslie at Maverick Capital.

“I still think that the good people will do well,” Mr. Robertson said.


Asked about the U.S. presidential election, Mr. Robertson had kind words for Republican nominee Donald Trump but said he won't be voting for him.

“I know Donald and I like Donald, and I really respect the Wollman Rink, which he's put back in Central Park,” Mr. Robertson said, referring to the New York ice-skating rink Mr. Trump renovated in the 1980s. “But I'm out of that race. I'm going to vote for the former governor of New Mexico and the former governor of Massachusetts.”

Gary Johnson, the ex-governor of New Mexico, and his running mate William Weld, from Massachusetts, are representing the Libertarian Party in this year's race.


What do you think?

View comments

Recommended for you

Reporter Ryan Neal discusses how investors inside and outside financial advice have become interested in the industry's technology, and introduces us to some top people fueling the trend.

Video Spotlight

Recommended Video


Latest news & opinion

The dealmakers financing top adviser technology

Meet the money that backed Betterment, eMoney, Riskalyze, LifeYield and more.

Robos with the best and worst portfolios over the last two years

Schwab tops latest Robo Report showing performance of seven digital-advice portfolios.

Super Bowl of financial scams that hit NFL players

Big paychecks often attract unscrupulous financial advisers to the National Football League, resulting in a long list of high-profile financial implosions, many of which end up in court.

Funds that missed the January rally — some by a little and some by a lot

Here are 10 funds that whiffed when at bat against the S&P 500 index, and why they struck out.

LPL Financial signs up 953 NPH advisers and $34.4 billion in assets

Broker-dealer says it is on track to bring over 70% of NPH revenue as part of its acquisition.


Hi! Glad you're here and we hope you like all the great work we do here at arjuna-design. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting arjuna-design.com? It'll help us continue to serve you.

Yes, show me how to whitelist arjuna-design.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Last News

ashmore emerging markets debt fund corporate yield spreads air traffic controller pension ira contribution due date ubs salaries 16pf personality test online free aon brokerage american funds municipal bond funds shelter insurance spotlight is whole life insurance taxable fnsxx vanguard s and p 500 index fund ceo bank of america merrill lynch federated total return government bond fund who is the richest rock star social security based on spouse earnings is a financial advisor a fiduciary american funds the growth fund of america a t rowe price international equity index health care costs in retirement estimator wrong social security number on w2 how much a 1943 penny is worth the seven stages of money maturity what to do if you suspect elder financial abuse how to set up a 403b chas schwab client login lord abbett growth and income generation x y millennials vanguard health sciences fund rs large cap alpha fund prudential personal retirement plan vanguard fixed annuity calculator 401k rollover tax form high yield muni bonds vanguard retirement fund 2050 contribution deadline for ira