Exit Soros (Mercenary Retrospective)

July 27, 2011
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The big news this week — apart from the debt ceiling debacle — was the retirement of George Soros from public money management.

Known widely as “The man who broke the Bank of England” — and less widely as “the palindrome” who struck fear in the hearts of floor traders — the 80-year-old Soros is considered one of the greatest investors and speculators of the age.

Via Reuters:

Billionaire investor George Soros, whose stock-picking career has spanned nearly four decades, said he will manage money only for himself and his family as new regulations threaten to crimp the hedge fund industry he made famous.

The octogenarian fund manager, known as much for earning $1 billion on a nervy currency bet as for giving away millions to support liberal causes, will return roughly $1 billion to outside investors most likely by the end of the year and turn Soros Fund Management into a family office. The sum represents only a small portion of the $25 billion he oversees.

Keith Anderson, who has been Soros’ chief investment officer since 2008, will leave the firm.

In many ways it’s not truly a retirement. Giving back the $1 billion (less than 5% of the total) will allow Soros to manage his funds without SEC headaches or scrutiny from regulators. This continues a trend of top dog managers with multi-billion-dollar fortunes retreating from the spotlight.

Some folks loathe Soros for his politics, which have gotten a little extreme at times. But in the realm of trading and investing, and pioneering new approaches and theories, he is a legend and an inspiration.

In that light, here is a quick roundup of Soros-themed pieces from the archives:

  • IMA Part I: 3-D Structures and General Conditions. Soros was one of the earliest and most successful practitioners of the “3-dimensional” fund structure, allowing the portfolio to “grow like an amoeba” and seeing all parts in relation to the whole. In this piece, we reference his best work, Soros on Soros, to examine how it’s done.
  • A Public Service Announcement: Soros on False Trends. In this piece we highlight the “false trends” idea that Soros articulated best, clarifying the interplay between belief and reality (in markets they cannot be separated). Excerpts from Soros’ June 2010 “Act II of the Drama” speech also highlighted.
  • Four Lessons from Druckenmiller. Stan Druckenmiller was Soros’ right hand man for many years — seeing him as coach and mentor — and the actual architect of the 1992 sterling trade that inspired the famous nickname. As such, the “four lessons” have their roots with Soros too.
  • Inflationary Boom-Bust Cycle Redux. This visual depiction of the boom and bust cycle, as relating to credit flows and eventual speculative collapse, draws on lessons Soros taught and emphasizes the power of “false trends” while they last.
  • Interview With a Trading Legend, Part VIII. In this final installment of our “trading legend” interview with Peter Brandt, the question is posed: “George Soros has written books on his theory of how world economics works – the closed loop between the economy and the markets and so forth. What do you personally think about Soros’ theories?”

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