Julian Robertson\'s `Tiger Cubs\' Beat Hedge-Fund Rivals in 2007

Date: Saturday, January 12, 2008
Author: Katherine Burton, Bloomberg

Hedge-fund managers known as the Tiger Cubs because they learned to pick stocks at Julian Robertson's Tiger Management LLC beat their peers in 2007 by profiting from the most volatile equity markets in five years.

Chase Coleman's Tiger Global Management LLC in New York, which was backed by Robertson, returned 71 percent after fees, fund investors said. John Griffin, the former Tiger Management president who oversees $7 billion at New York-based Blue Ridge Capital LLC, posted a 65 percent increase.

Tiger alumni including Lee Ainslie, Andreas Halvorsen, Paul Touradji, Stephen Mandel, Bill Hwang and Chris Shumway showed gains last year ranging from 27 percent to 51 percent, said investors, who asked not to be identified because the returns aren't public. The average stock hedge fund rose 10.7 percent last year, according to Chicago-based Hedge Fund Research Inc.

``Across the board the Tiger Cubs were some of the best- performing funds last year because they've been able to provide two-sided alpha,'' or gains on both rising and falling stocks, said Ted Wong, chief investment officer at Constellar Capital LLC in New York, which farms out money to hedge funds.

Market volatility, as measured by the Chicago Board Options Exchange SPX Volatility Index, almost doubled last year to the highest since early 2003. The price swings provided investors with more opportunities to profit from stocks they owned as well as those that they shorted, or bet would decline.

Robertson, 75, one of the most successful hedge-fund managers, returned an average of 25 percent over two decades. He gave back client capital in 2000 after 18 months of losses and redemptions caused assets to drop to $6 billion in March 2000 from $22 billion in August 1998.

$25 Billion

Robertson has since seeded about 30 fund managers, including Coleman and Hwang, who oversee a combined $25 billion. The group generated an average return of 55 percent before fees last year.

The Tiger Cubs are mostly stock-pickers in Robertson's mold, relying on research to identify companies they deem inexpensive based on financial yardsticks such as earnings growth, and to bet against stocks they think are poised to fall. They pay special attention to the quality of a company's management.

Robertson declined to comment, as did executives from the other firms.

Given their common training, the Tiger Cubs often end up investing in the same companies.

Apple, America Movil

Apple Inc., maker of the top-selling iPod media player, was owned as of Sept. 30 by Mandel, who runs Lone Pine Capital LLC; Ainslie, who heads Maverick Capital Ltd.; Shumway of Shumway Capital Partners LLC; and Halvorsen's Viking Global Investors LP, according to U.S. Securities and Exchange Commission filings. The Cupertino, California-based company more than doubled last year.

America Movil SAB, Mexico's largest mobile-phone company, was owned by Lone Pine, Maverick, Shumway, Blue Ridge and Tiger Global. The stock gained 37 percent last year.

Maverick Capital is based in New York, while Lone Pine, Shumway and Viking are run out of Greenwich, Connecticut.

Other shares owned by four or more of the Cubs at the end of the third quarter included drugstore chain CVS Caremark Corp.; EMC Corp., the largest maker of data-storage computers and programs; Internet search engine Google Inc.; and Qualcomm Inc., the second-largest supplier of chips that run mobile phones.

The Cubs also benefited from the collapse of the subprime- mortgage market. They made money betting against financial companies, homebuilders, mortgage insurers and home lenders, investors said. They also profited by investing in credit default swaps, financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt.

Touradji Commodities

Touradji, who runs New York-based Touradji Capital Management LP, is the only one of the bunch who is not a pure stock picker. He also trades commodities and this year made 41 percent in part from winning bets on base and precious metals, as well as energy.

Robertson and his managers plan on giving away some of their newly earned fortune. Robertson has said he will donate $100 million to the Tiger Foundation, which he established in 1990, if its board members raise $33 million. A former Tiger employee said that match should be announced in the first half of 2008.

Listed below are the returns for Tiger Cub managers.

MANAGER FIRM RETURN AUM

Chase Coleman Tiger Global 71% NA
John Griffin Blue Ridge 65% $7 billion
Chris Shumway Shumway 51% $6.6 billion
Stephen Mandel Lone Pine 46.5% $7.9 billion*
Bill Hwang Tiger Asia 45% NA
Paul Touradji Touradji Capital 41% NA
Andreas Halvorsen Viking Global 41% $10 billion
Lee Ainslie Maverick 27.8% $11.5 billion*
*Assets are for the Lone Cypress group of funds

Source: Fund investors

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net