Money can be dull. There are only so many denominations, and only so many ways to make it. What’s interesting are the people who risk it, and over the past four decades no one has made more of a spectacle of risk than George Soros, whose http://www.bloomberg.com/news/2011-07-28/soros-goes-private-as-golden-era-of-rock-star-traders-ends-with-dodd-frank.htmlQuantum fund famously bet $10 billion that the Bank of England would be forced to devalue the pound. Soros earned $1 billion on that trade and incalculable legend points.
Now, Soros is going to stop risking other people’s money. By the end of this year, his Soros Fund Management LLC will have no outside customers for the first time in 42 years. The shift concludes a process that began in 2000, when Soros stopped accepting new investments, Bloomberg Businessweek reports in its Aug. 1 issue.
Four years later he turned management of the company over to his sons Robert and Jonathan. On July 26, after months of debate, the three men decided to return the less than $1 billion of outsiders’ money Quantum still oversees and convert the firm into a family office to manage almost $25 billion for George, his family, and foundations.
There’s a two-word explanation for closing what was once one of the world’s biggest hedge funds and consistently one of the best-performing --- with returns of about 30 percent annually in its first 30 years: Dodd-Frank. The law requires hedge funds to register with the Securities and Exchange Commission and provide information about customers, employees and assets. By returning outsiders’ money, Soros Fund Management escapes that rule and the loss of privacy that goes with it.
‘Unfortunate Consequence’
“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,” the brothers wrote in a letter to investors.
The move completes the 80-year-old Soros’s transformation from speculator to philanthropist statesman, a role he has said he first imagined for himself as a Hungarian émigré studying at the London School of Economics & Political Science after World War II. In the past 30 years, Soros said he’s given away more than $8 billion to promote democracy, foster free speech, improve education, and fight poverty around the world.
Economic Trends
Soros’s retreat from the stage is a marker of just how much the industry has changed --- and how much he’s changed the industry --- since he opened his first fund in 1969 with $4 million from investors and his own savings. Back then, hedge funds catered mainly to wealthy individuals and managers stayed out of the limelight. No one even bothered to track the number of hedge funds, which differ from mutual funds because they bet on falling as well as rising prices of stocks and other securities and can concentrate their money in a handful of positions.
Soros -- a “macro” investor who profits from broad economic trends rather than focusing on individual stocks or bonds --- was among the first managers to give the industry visibility. The world was his casino, and after his 1992 bet against the pound, investors and governments were forced to pay attention. Whenever a currency plunged, there were rumors Soros had been betting against it. Mahathir Mohamad, the Prime Minister of Malaysia, called him a moron for profiting from the ringgit’s decline in 1997, even though Soros was buying the currency at the time.
Russian Government
In January 1998, Soros went to South Korea and met with President-elect Kim Dae-Jung. His conclusion after the meeting was that the country needed a reorganization of its entire economy. If South Korea made such changes as strengthening its banks and letting foreigners buy controlling stakes in its companies, he said Quantum would invest up to $1 billion in the country. South Korean stocks jumped 7 percent over the next three days.
