Guide:
To be called a hedge fund master generally requires several conditions: a performance record of more than ten years, a compound rate of return (20%+), the amount of money earned must be in units of billions, and there have been several classic battles.
There are about 20 or 30 investment masters who meet these conditions in the world, and they are all legends in the investment world.
The investment history of the masters from a net worth of US$1 to tens of US dollars or even US$40,000, and their wealth stories of billions of dollars are naturally fascinating, but what we are more interested in is their journey from zero to one, that is, starting a business and This step in raising your first fund.
Before a master became a master, he had no reputation and no historical achievements. The team was a polished commander, and the first step in starting a business was not easy. It also depended on a person or chance.
For the masters themselves, there are countless big and small battles worth recalling in their lives, but it is estimated that the most unforgettable one is the first battle-the first recruitment battle, because there is a little bit of excitement and longing, and sometimes a little bit of regret.
Here are the entrepreneurial stories of five investment masters, from which we can not only appreciate the difficulties of private equity entrepreneurship, but also find the secret of choosing an excellent private equity.
The most successful private equity in the world is naturally the richest man Buffett (Buffett holds 308,300 Berkshire Class A shares, with a stock price of US$235,000 per share and a net worth of US$72.5 billion). After 13 years in private equity, Buffett Moved to Berkshire Hathaway. Buffett is the earliest among many investment masters, and his investment career is also the longest. At the age of 86, he is still struggling in the front line of investment.
Buffett was born in 1930. He entered the Wharton School of Business at the University of Pennsylvania in 1947 as an undergraduate and completed his studies in three years. In 1950, he went to the Finance Department of Columbia University to study as a graduate student and studied under Ben Graham, the godfather of value investing.
After graduating in 1951, he hoped to work for Graham without pay, but was politely rejected, so he worked as a stock seller in his father's securities company for three years. During these three years, Buffett immersed himself in researching stocks, took Carnegie's speech class, and taught investment principles at the University of Omaha (the textbook is "Smart Investor" written by his mentor), and at the same time fell in love and Married, at the age of 22, married Susie, who was 19, and had a daughter.
In 1954, Graham finally agreed to Buffett to work in his company. Buffett worked there for two years in stock selection until Graham dissolved his company. This is Buffett's experience before starting a business. Although Buffett is only 26 years old at this time, he is a professional investor with seven years of stock experience.
In May 1956, Buffett took his wife and two children back to his hometown of Omaha to start his own business and launched the Buffett Partnership Fund. The size of this first fund is US$105,000, and there are 7 partnership members, including Buffett's sister and brother-in-law, aunt, former roommate and his mother, Buffett's lawyer and Buffett himself.
Among them, Buffett invested 100 US dollars (according to the Chinese way of writing, can "Snowball" be called "From 100 US Dollars to 70 Billion"?), in fact, Buffett has a net worth of 140,000 US dollars at this time, and he still has the confidence to start a business. .
Buffett established two more partnership funds that year, and by the end of the year, the total net assets of the partnership funds reached $303,726. What is the concept of these money? Buffett's annual salary working for Graham in 1955 was $12,000, and he bought a five-bedroom house on Omaha's Falam Street in 1957 for $31,500.
Since then, Buffett’s private equity journey has been smooth and smooth, the rate of return has been soaring all the way, and more and more customers have accumulated. By New Year’s Day in 1962, the net assets of the partnership fund had reached 7.2 million US dollars (of which 1 million belonged to Buffett himself), and the investors had grown to 90 people. At this time, Buffett moved out of the bedroom to find an office, and recruited the first full-time employee at the same time.
Buffett's entrepreneurship is quite successful. On the one hand, he should thank his father and mentor for the relationship network, but the most important thing is his personal appeal. Buffett made his ambition very early. As early as the age of 12, he announced that he would become a millionaire before the age of 30. He has a strong interest and confidence in making money. In 1968, Edward Thorpe, the grandfather of quantitative investment, played bridge with Buffett several times, and concluded that this person would become the richest man in the United States because of his first-class investment philosophy, analytical ability, and flexibility.
Buffett ended the Buffett Partnership Fund in the autumn of 1969, mainly because there were too few value investment opportunities at this time (the U.S. stock market entered the violent 1970s), and the fund size was too large (at the beginning of 1969, the fund size had increased to 104 million US dollars ) and don’t want to be 100% invested and say “I’m retiring” (47 years later and still not retired!).
Buffett did not retire, but moved to Berkshire. Buffett spent his whole life to build Berkshire into a money-making machine, and he became the richest man in the world.
Buffett’s 13-year average annual compound rate of return from 1957 to 1969 was 23.2%. Among them, 1969 was the worst performance, basically zero, followed by 1957, with a rate of return of 9.3%. The middle 11-year rate of return was good.
Berkshire's performance has been recorded since 1965. In the 51 years from 1965 to 2015, the average annual compound rate of return of Berkshire's net value per share was 19.2% (since 2014, Berkshire Hill's stock price yield was also included in the "Letter to Shareholders". By 2015, the figure was 20.8%, which was close to the increase in net worth, but there were many more years with negative returns, especially the 48.7% decline in 1974 It fell 31.8% compared to 2008), and the cumulative increase is 7989 times!
If you add the results of the Buffett Partnership Fund from 1957 to 1964, then after a total of 59 years, the investment of 1 US dollar can grow to 40,000 US dollars!
Will Buffett really retire after the 2017 shareholder meeting? At that time, he will have a 60-year performance record. This record is unprecedented in the investment history, and it is estimated that it will also be unprecedented.
Soros was also born in 1930, the same age as Buffett, which is really a coincidence. However, as an immigrant from Hungary who came to the United States, Soros had a much more difficult journey to start a business, which can be described as a typical rebellion.
Soros survived the Nazi occupation of Hungary and left Hungary for London in 1949 after the war to study at the London School of Economics (LSE). Soros received his degree in 1953, and his thesis advisor was the famous philosopher Karl Popper. After graduating, he worked a few short jobs in the UK, such as handbag sales, and finally found a job as a trader at SF Bank (Singer & Friedlander), doing gold and stock arbitrage transactions.
In 1956, Soros arrived in New York with $5,000 in his pocket. With the help of colleagues in London, Soros found a job at FMMayer, first as an arbitrage trader and then as an analyst. In 1959, he switched to Wertheim and continued to engage in European securities business. In 1963, he moved to Arnold & S. Bleichroeder, and in 1967 he was promoted to director of the research department.
In terms of life, Soros got married in 1961 and became a U.S. citizen in the same year. This year, Soros spent his weekends re-drafting "The Burden of Consciousness" written ten years ago (his own comment is: except for the title, the full text is lackluster), hoping to publish it, and sent the manuscript to his mentor Karl Po Poole Review, 1963-1966 and took three years to revise, but it was never published.
Soros still wanted to be a philosopher at this time, but life was very stressful. Five or six years after his father came to the United States, he got cancer. Soros had to find a surgeon who could provide free medical care. In the end, Soros temporarily pressed his heart to be a philosopher and returned to the field of making a living.
Soros established the first fund within the company in 1967 - First Eagle Fund, which is a long-only stock fund. Soros established a second fund in 1969, called Double Eagle Fund (renamed Quantum Fund a few years later), which is a hedge fund. Its investment scope includes stocks, bonds, foreign exchange and commodities, and it can be sold short and leveraged.
The Double Eagle Fund was established by Soros himself with an investment of US$250,000. Soon some wealthy Europeans he knew injected US$4.5 million. The total US$4.75 million was Soros’ starting capital.
In 1970, Jim Rogers joined Soros' team, responsible for research, while Soros focused on trading, and the two became golden partners. In 1973, Soros set up his own business and established Soros Fund Management Company. The office has only three rooms and overlooks Central Park in New York.
Starting from $4.75 million in early 1969, Soros increased its value to $449 million at the end of 1984 through 16 years of hard work.
In the past 16 years, the total external capital inflow was -16 million, mainly because Soros lost 22.9% in 1981, when customers withdrew 100 million US dollars, and the total inflow in the rest of the years was 84 million. Soros' average annual compound rate of return over the past 16 years is 30.89% (Buffett's is 23.41% in the same period). Although there is such a good performance, the size of the fund has not grown rapidly because of it, and has been relying on internal income growth. No comparison.
From 1985 to 1999, the performance of the Soros Fund was even better, pushing the annual compound rate of return of the Soros Fund to 32.49% (1969-1999, a total of 31 years, and Buffett was 24.93% in the same period). Soros Fund also ushered in rapid development in scale, reaching US$1.46 billion at the end of 1986 and US$5.3 billion at the end of 1991.
After sniping the British pound in 1992, Soros became famous all over the world. At the end of 1993, the size of the Soros fund had grown to 11.4 billion U.S. dollars, and at the end of 1999 it reached a peak of 21 billion U.S. dollars.
Soros Fund lost 15.5% in the Internet bubble burst in 2000, which was the second loss after 1981. However, it regained 13.8% in 2001. The income in the next few years was acceptable, but it was semi-retired after all. The state is not as good as in the early years.
In the subprime mortgage crisis from 2007 to 2009, Soros once again turned the tide, making profits of 32%, 8%, and 28% respectively, which once again proved his most outstanding global macro trading ability.
Tiger Fund Robertson
Julian Robertson of Tiger Fund belongs to the godfather of the hedge fund industry, and is known as the Big Three of hedge funds together with Soros and Steinhardt. However, Robertson was a late bloomer. He was 48 years old when he founded the Tiger Fund.
Born in 1932, Robertson was only two years younger than Soros. He liked sports when he was young, and he played baseball and rugby very smoothly. After finishing North Carolina State University in 1955, he joined the Navy and was promoted to lieutenant at the end of his two-year service. In 1957, he went to New York and joined Kidder Peabody & Co., where he stayed for 22 years.
Robertson worked in sales at Kidder Peabody, promoting stocks and bonds to individual and institutional investors, and held various positions, eventually becoming the director of the money management branch. Compared with sales, Robertson prefers fund management. After work, he manages personal stock accounts for some friends and colleagues, and the results are good. Robertson adopts a value investment strategy, which selects stocks by mining fundamental information and assessing value, and the holding period is relatively long.
Robertson had a close friend, Robert Borch, who in 1970 became the son-in-law of Alfred Jones, the man credited with inventing the hedge fund. Jones was originally a reporter. When he wrote an article for Fortune, he did some research on the stock market and found that the long-short pairing of stocks can eliminate systemic risk and make profits in both bull and bear markets. Relying on this secret, Jones established a hedge fund and made a fortune. Robertson communicated frequently with Boqi and Jones, and also realized the charm of hedging. He combined long-short hedging and value investing to form his own model.
In 1978, Robertson took his family to New Zealand for a long vacation. He wanted to write a novel about how a southerner successfully established himself on Wall Street. Unfortunately, he got tired of writing the book after a few weeks. In the end, the beautiful scenery of New Zealand, golf, and tennis could not keep his heart, because he was going to start a business.
In May 1980, Robertson and his friend Thorpe McKenzie raised a total of $8 million and established the Tiger Fund. The name Tiger was suggested by Robertson's seven-year-old son, after they had worked hard to come up with a nice name.
Robertson is a gregarious guy (he has thousands of business cards in his card case), many friends, and extensive business connections. He expected to raise $100 million, but was disappointed, only 8% of the fundraising goal was achieved! This includes Jones' fund, which was transformed from self-operated to FOF after his son-in-law Boqi took over.
Fortunately, the timing was very good in 1980, which coincided with the beginning of the 20-year bull market in US stocks. Tiger Fund achieved an after-fee return of 54.9% that year, marking a successful start, and achieved an average high return of 32.7% in the following six years.
Robertson perfectly combines value investing and stock long-short strategies. By recruiting a large number of smart and athletic young people to dig into the fundamentals, he has done a good job in internal talent training and management and external marketing, and the scale has been rapidly expanded. .
In 1991, Tiger Fund became the third hedge fund with a management scale of more than 1 billion US dollars. By the end of 1993, it had reached 7 billion US dollars, more than Steinhardt and only a little less than Soros (you must know that Tiger Fund started in pesos. Ross was 11 years late). The size of the fund reached a peak of $21 billion in August 1998, and the number of company members exceeded 210.
However, after the scale expanded to tens of billions of dollars, due to the liquidity of the stock market, Robertson had to expand his investment field from stocks to markets such as bonds, foreign exchange and commodities, which is the so-called global macro market. Robertson's value investment style is not very suitable for global macro investment. Although he made a lot of money at the beginning, he made a lot of money in bonds, foreign exchange, palladium, and copper. With a loss of more than 4 billion, the fund suffered heavy losses and turned from prosperity to decline.
In the late 1990s, Nasdaq’s Internet stocks soared all the way, and their prices went from overvalued to even more expensive. Tiger Fund’s strategy was to long traditional value stocks and short Internet stocks. As a result, both ends suffered setbacks. It is down 19% year-on-year and down 43% from its peak in 1998, while the S&P 500 has risen 35% over the same period.
Tiger Fund fell another 13% in the first quarter of 2000, and the tide of redemption continued. Robertson could no longer hold on, and finally closed the Tiger Series Fund in March 2000. Peaked and then crashed.
Although it has continued to decline in the last three years, the 21-year compound rate of return since Tiger Fund was established is still as high as 23.37%, and the value of the original investment of 1 US dollar has increased to 82.32 US dollars.
The ending of the Tiger Fund is regrettable, and a legend has come to an end. However, Robertson’s story doesn’t end there. He later invested and supported many little tigers. There are about 40 young fund managers who came out of Tiger Fund to start a business. , accounting for 20% of stock long-short strategy funds, has become an influential group in the hedge fund industry.
The reason why Robertson ranks among the top hedge fund masters is that he has cultivated a large number of young tigers, which other masters cannot do. Whether it is Buffett or Soros, it is difficult to find a satisfactory heir. difficulty.
Greenlight Capital Einhorn
Einhorn is a rising star in the hedge fund industry, a well-known value investor and short seller, and is called "the next Buffett" by some.
Einhorn was born in 1968. He liked mathematics and debate in middle school. He studied government management at Cornell University as an undergraduate. His undergraduate thesis elaborated on the periodic regulatory issues of the US aviation industry. The conclusion is not to invest in the aviation industry. In Buffett’s words That said, "Investors should have shot the Wright brothers' plane out of the sky."
After graduating from a bachelor's degree in 1991, he worked as an investment bank analyst at DLJ for two years, working more than 100 hours a week. After two painful years, Einhorn did not go to business school as usual, but went to the hedge fund Siegel College Fund Company as a buy-side analyst. After three years, he learned how to compare investment and investment research. in place.
At the beginning of 1996, Einhorn and his colleague Jeff resigned to start a business together. Because his wife gave the green light, they named the company Green Light Capital Fund. Einhorn and Jeff thought they could raise $10 million, but in the end they only raised $900,000 in May, of which $500,000 came from Einhorn's parents, and Einhorn and his partners also contributed $10,000.
The strategy of Greenlight Capital is the same as that of Tiger Fund, which combines long and short stocks with value investment and in-depth fundamental research. The difference is that it does not match longs and shorts one by one, but looks for longs worth longs and shorts worth shorts. Match the overall position. The holding period is generally more than 1 year, and the positions are concentrated. Generally, 30%-60% of the capital is invested in the largest 5 long positions. The fund pursues an absolute return target, that is, it must strive to achieve a positive return regardless of the market environment.
A funny thing happened during the fundraising process. A wealthy friend introduced by a partner gave Einhorn a poker intelligence test. The title was: Take cards of the same suit from a deck of poker and arrange the order of the cards so that people can compare them to each other. The top card is turned face up, the next card is placed at the bottom, another card is turned face up, the next card is placed at the bottom, and so on until all the cards are pressed. The numbers are arranged sequentially. Einhorn got it wrong and missed out on the investment. (I really hope that someone can give me this kind of problem too!)
After May, Greenlight Capital achieved a high return of 37.1% in 1996. There was no negative return in a single month, and assets under management quickly reached US$13 million. In order to celebrate the success of the first year, Einhorn invited 25 investors including their parents to have a meal of Italian food on a winter night, and reported the results by the way!
In 1997, Greenlight Capital made a profit of 57.9%, and its assets under management reached US$75 million by the end of the year. In 1998, the performance of Green Light Capital was mediocre, only 10%, but the scale increased to 165 million US dollars. In 1999, the fund achieved a 39.7% rate of return and assets under management grew to $250 million. In 2000, the fifth year, the fund's return rate was 13.6%, while the Nasdaq index plummeted 39%, and the fund size grew to $440 million. In 2001, Nasdaq plummeted another 20%, while Greenlight Capital achieved a rate of return of 31.6%, with assets under management reaching $825 million.
In the 1990s, the U.S. stock market skyrocketed, and a large amount of money continued to pour into the hedge fund industry. Einhorn Yigao was bold, and he was much luckier than Tiger Fund with the same investment style. His performance was surprisingly good, and he enjoyed a few years of good time.
Einhorn became famous for shorting Lehman Brothers in 2008, earning more than $1 billion from it. At present, he is still active in the front line and has great influence in the market.
Michael Bury
Michael Burleigh is not considered a big crocodile in terms of scale and working time, but his story is more inspirational, and the battle to fame is quite thrilling, and his way of running hedge funds has been carried forward in China, so let’s also watch Check out his story.
Burleigh was born in 1971. When he was 2 years old, his left eye was removed due to retinal glioma, and a fake eye made of glass was installed. In elementary school, Burleigh had surprisingly high IQ tests but few friends.
When he was in the fifth grade, his parents divorced. Burleigh and his younger brother lived with their father. During weekends and vacations, they worked as part-time workers in the IBM laboratory where their father worked. The money they earned was used to invest in mutual funds.
When he was in high school, his parents remarried, Burleigh became more and more confident and his grades got better and better, but when he graduated, he was rejected by his favorite Harvard University because of the negligence of his English teacher, and went to the medical school of UCLA. Preparatory courses for majors.
Burley didn't have a good relationship with those around her and was later diagnosed with Asperger's Syndrome, a form of autism that has social difficulties. Naturally, Burleigh turned his interest in stocks again. In 1991, Burleigh was admitted to the Vanderbilt University School of Medicine, and his father passed away in his third year.
In 1996, Burleigh started a personal website valuestocks.net that talks about stocks, publishing several long articles every week. Probably because there were too few websites on the Internet at that time, the MSN executive browsed to Burleigh's website a few months later and invited him to become an MSN columnist at $1 per word. Burleigh readily agreed, took up a pseudonym, "The Value Doc" (The Value Doc), and started talking about stocks on MSN, and soon gained a lot of readers.
Graduated from Burleigh School of Medicine in 1997, owed $150,000 in student loans, and found a pathology research residency at Stanford University Hospital. In the autumn of that year, he posted a marriage proposal on the dating website Match.com (the first generation of Internet users! Why don’t you devote yourself to the Internet!), and fell in love with a Chinese woman, Li Deying, and got engaged after 3 weeks. Being a doctor is very hard. In order to do a good job in the stock market, Burleigh often has to burn the night and use the night time to publish articles and update his website.
In June 2000, Burleigh was 29 years old. His work at Stanford University Hospital ended and he no longer wanted to practice medicine. He felt that he should follow Buffett's professional investment. With the support of his wife and family, he opened an account with Bank of America and started his hedge fund career. Burleigh was so ambitious that he set the minimum net worth requirement for investors at $15 million, basically excluding everyone he knew.
Fortunately, a few weeks later, Greenblatt, the author and hedge fund manager of the best-selling book "You Can Be a Stock Market Genius", approached him and bought a 22.5% stake in Burleigh for $1 million. Greenblatt Also a fan of Burleigh, had been waiting for him to leave the medical industry. Burr used the money to pay off his student loans, named the company Scion Capital, and rented a small office a few blocks from Apple Computer's headquarters that had previously been owned by Apple's consortium. Founder Woz (Steve Wozniak).
Burleigh's road to private placement went smoothly. In 2001, the S&P 500 index fell by 11.88%, and the net worth of children and grandchildren capital rose by 55%. In 2002, the S&P fell another 22.1%, and Burleigh gained 16%. In 2003, the stock market rebounded, and Burleigh's portfolio rose 50%. In 2003, the assets managed by Burleigh reached 250 million US dollars, and by the end of 2004 it reached 600 million US dollars, and it stopped accepting new investments.
In 2003, with an annual income of more than $5 million, Burleigh bought a six-bedroom home in Saratoga, Calif., for $3.8 million for a family of four.
While buying a house, Burleigh felt that the housing price was a bit of a bubble, so he did in-depth research on the housing market and MBS (housing mortgage-backed securities), and the conclusion was astonishing. He felt that the housing crisis would break out sooner or later, and he decided that shorting MBS was a big opportunity. It's his "Soros Trade".
He made this discovery a year before big short Paulson and several years before Soros himself. So from 2003 to 2006, he carried out his "Soros Trade" for four consecutive years, shorted some financial stocks, and kept buying CDS contracts. In these four years, the CDS positions have been floating losses.
Despite the tremendous pressure, Burleigh still has confidence in his own judgment, but investors have gradually lost confidence. Even though Burleigh has earned 242% for investors in the past five years, investors are still very opposed to Burleigh’s "Soros Trade" . Burleigh's efforts to launch a new fund failed, and the relationship with the client was still very tense. In October 2006, even Greenblatt, who admired him at first, couldn't stand it. He flew to San Jose and the two quarreled. A fight broke up. This year, clients withdrew $150 million, and Burleigh had to sell half of his CDS positions at a loss.
It was not until August 2007 that Burleigh began to usher in victory. At the end of the year, the company made a profit of 150%, earning $700 million, and Burleigh personally earned $70 million. Burleigh was ready to move forward in 2008, but clients continued to withdraw funds. In the second half of 2008, the funds under management were only US$450 million, which was much smaller than the US$650 million managed at the beginning of 2005. Burleigh finally couldn't take it anymore, and in 2009 Closed his own company at the beginning of the year.
Michael Bury’s entrepreneurial path of private equity funds has countless imitators in China ten years later. There are a large number of private traders in China, who gain fans by writing articles on forums and blogs, or by displaying trading results, participating in stock speculation competitions or futures Show your face in the contest. Generally speaking, the road to entrepreneurship for this type of grassroots fund is very difficult. In terms of scale, it is completely unable to compete with fund managers from investment institutions such as public offerings, and the final performance is also mixed.
from 0 to 1
The above masters are relatively successful cases, from zero to one, and then to legend. But there are also many failure cases. Many hedge funds that started at the level of 1 billion ended in failure. 1 is the peak, such as Long-Term Capital Management (LTCM).
Of course, this is not an inevitable rule. Through the initial offering of private equity funds, it is difficult to predict the future path of fund managers. Prediction is difficult, especially predicting the future. This is true for financial investment and for selecting fund managers.
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