Soros to close Quantum fund to outsiders
George Soros, the billionaire hedge fund manager, is closing his Quantum fund to outside investors and returning their money.
Quantum, which will continue to manage about $24.5bn of Soros family money, blamed the decision on new financial regulations requiring hedge funds to register with the Securities and Exchange Commission.
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“An unfortunate consequence of these new circumstances is that we will no longer be able to manage assets for anyone other than a family client as defined under the regulations”, Jonathan and Robert Soros, Mr Soros’ sons and Quantum’s co-deputy chairmen, wrote in a letter to investors on Tuesday.
New regulations require hedge funds with more than $150m under management to report details about investments, employees and investors, and also makes them subject to possible inspections by the SEC. Mr Soros’ decision contrasts with his own reputation as an advocate for both government and corporate transparency.
A spokesman for Mr Soros declined to comment.
Quantum is returning about $750m of capital to outside investors, according to a person familiar with its decision. Keith Anderson, chief investment officer since 2008, is also leaving the fund.
The move brings an end Mr Soros’ four-decade career as a hedge fund manager. A Hungarian emigré, he made more than $1bn in 1992 betting that the UK would be forced to devalue sterling and pull out of the European exchange rate mechanism.
Mr Soros started Quantum in 1973 and developed a reputation for trading on instinct .
Since inception, Quantum has returned roughly 20 per cent annually. At the end of June, however, the fund was down 6 per cent year-to-date. Speaking in April, Mr Soros told a panel of investors that “I find the current [market] situation much more baffling and much less predictable than I did at the time of the height of the financial crisis”.
After the technology bubble burst in 2000, Mr Soros returned most of Quantum’s outside capital, or about 40 per cent of the $11bn it then had under management, in order to concentrate on his philanthropic work through the Soros Foundations.
The remaining capital was largely farmed out to other hedge fund managers. Mr Soros returned to active management in 2007, during the early stages of the financial crisis.
“He’s 81 years old in an industry where many people retire early, and with his tremendous success he’s one of a very select group who can just decide that he doesn’t want to deal with it,” said Leor Landa, a hedge fund partner at law firm Davis Polk. “Most sizeable hedge fund managers would not view the incremental resources that go into SEC registration as enough of a reason to shut down.”
Other hedge fund veterans including Stanley Druckenmiller, who managed Quantum in the 1990s, and Carl Icahn have also recently decided they will no longer manage other people’s money.
“It demonstrates that hedge funds, at least as we once knew them, are gone, replaced by far more transparent entities,” said Anthony Sabino, professor at the Tobin College of Business.
Soros Returns Capital, Avoids Dodd Frank
Robert Holmes
Soros will return money to investors by the end of the year, Bloomberg reported Tuesday, citing two people briefed on the matter. Soros Fund Management will focus on managing assets for his family, according to a letter to the firm's investors. Soros will turn 81 on August 12.
We wish to express our gratitude to those who chose to invest their capital with Soros Fund Management LLC over the last nearly 40 years," the letter to investors reads, according to the Bloomberg report. "We trust that you have felt well rewarded for your decision over time."
Initial media reports trumpeted the end of Soros' 40-year career as a hedge-fund manager, although the billionaire investor's firm is far from being done. Soros will return less than $1 billion to external investors, a drop in the bucket compared to the firm's total assets of more than $25 billion.
The reason? Under new requirements from the Dodd Frank act, hedge funds are required to register with the Securities and Exchange Commission by March 2012 if the fund continues to manage more than $150 million in assets for outside investors. The new requirements would call for funds to report information about the assets they manage, potential conflicts of interest, and information on investors and employees. The act allows an exemption for what the Commission considers "family office" advisers.
"We have relied until now on other exemptions from registration which allowed outside shareholders whose interests aligned with those of the family investors to remain invested in Quantum," the letter continued, according to the Bloomberg report. "As those other exemptions are no longer available under the new regulations, Soros Fund Management will now complete the transition to a family office that it began eleven years ago."
Yet, Soros Foundation is called the "Open Society"
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