What's up guys and welcome back to wall street millennial on this channel, we cover everything related to stocks and investing in the past, we've covered a lot of losses on the wall street bets forum, mostly involving yolos on call options. Some of these losses see people lose hundreds of thousands of dollars in today's video we're looking at an investment failure of a much larger scale, julian robertson is considered by many to be the godfather of hedge funds and in 1998, his company tiger management was the second Largest hedge fund in the world, he built up a track record over the 1980s and early 1990s as a legendary investor vastly outperforming the s p, 500., but a few disastrous trades around the time of the tech bubble destroyed the firm they spent two decades building. He was branded as an old economy investor who didn't understand the internet and new technology. He was forced to shut tiger management down in 2000 after losing billions of dollars for his investors.

In this video we're looking at the epic rise and fall of julian robertson, the godfather of hedge funds, born in 1932 in north carolina julian robertson, served as an officer in the u.s navy and later became a stockbroker in 1980. He raised eight million dollars from friends and family to start his own hedge fund, which he named tiger management. This amounts to roughly 26 million dollars in 2021 dollars, adjusted for inflation. He was a value investor and did deep due diligence on individual companies to determine which ones are undervalued and which ones are overvalued.

This made him not too different from other value. Investors such as warren buffett, but there are a few key differences. Firstly, tiger management didn't only buy stocks that he thought were undervalued, but also sold short stocks that they thought were overvalued. He and his team of investment professionals would try to identify the best 200 companies in the world and buy their stocks.

They would also find the worst 200 companies in the world and short their stocks. The idea is that whether the broader market goes up or down, the good companies should always outperform the bad companies. They enhance their returns by taking on large amounts of leverage and making speculative bets on currencies as well and for the first decade or so. This strategy worked amazingly, he made annual returns in excess of 25, which was far greater than the s p.

500.. After the berlin wall fell in, germany was reunified in 1989, he correctly predicted a surge in the european equity markets. He also correctly predicted a sharp increase in interest rates between 1992 and 1993.. Investors were rushing to put their money in tiger management by 1998.

They were managing 22 billion dollars, making them the second largest hedge fund in the world. Julian became a legendary investor, amassing a personal fortune of hundreds of millions of dollars. It was reported that in 1993 alone, julian personally made close to one billion dollars in compensation. As head of tiger plus investment gained on his own money, he invested in the fund, but all good things must come to an end.

Throughout the mid to late 1990s, the internet was first starting to gain steam and dot-com-related stocks were soaring. Many investors went all in on the internet and made staggering returns as the nasdaq searched to record highs. Julian saw stocks like pets.com ipo at ridiculous valuations with few exceptions. These internet stocks were burning, cash, lacked a viable business plan and had no prospect of ever becoming profitable.

Meanwhile, so-called old economy companies that had real profit saw their stock prices. Plunge investors were dumping their holdings in these old boring companies to free up more capital to buy com stocks. Julian saw this as ridiculous and knew that all stocks eventually revert to their fundamentals. This means that the value stocks would have to go up and growth stocks would have to go down tiger management's.

First, failure came in 1998 when he made a multi-billion dollar bet that the japanese yen would depreciate against the us dollar. Unfortunately, the exact opposite happened in the second half of 1998. The number of yen you can buy with one dollar decreased substantially. This means that the yen appreciated this was a concentrated bet and the fund lost 2 billion dollars or roughly 10 of their investors equity.

On this trade alone, but this was only the beginning of the hedge fund's troubles, one of his biggest positions was the airline operator us airways. He invested billions of dollars into the company and tiger management eventually owned 25 of their voting rights. Unfortunately, around this time, the u.s airline industry was becoming more competitive, as new airlines were entering the market. U.S airway stock declined from almost 60 dollars a share in 1999 to around 20 at the beginning of 2000..

Some of his positions did well such as samsung and intel, but the gains from these positions were not enough to offset the losses from us airways, as well as steep losses on his.com short positions, because hedge funds are not required to disclose their short positions. We don't know exactly what stocks he was shorting, but is widely believed that they shorted the crazy.com stocks, which were skyrocketing as the bubble inflated. Most of these companies ended up crashing 90 plus percent after 2000, and many went to zero. But as the great economist john maynard keynes said, the market can stay irrational longer than you can remain solvent, and this is exactly what happened to julian robertson and tiger management.

In 1999. Tiger was down 19 and in the first quarter of 2000 it declined another 13 percent, bringing the cumulative losses to more than 30 percent. Most of these losses were from his dot com short positions. This was unacceptable performance, as the nasdaq had roughly doubled.

In the same period, investors were pulling their money out of tiger management and putting them into other funds which were going along the dot com stocks abandoned by his investors. Julian had no choice but to close down the hedge fund in the first half of 2000.. He said that in a rational market, his strategy of value investing works well, but in the irrational environment of the tech bubble, where earnings and price considerations are overshadowed by mouse. Clicks and upward rush, logical, investing, does not work at the time.

Many thought this spelled the death of value investing, if not even the legendary julian robertson could make money as a value investor. How could anyone stand a chance almost immediately after tigers, shut down, the bubbles started to burst and the nasdaq fell more than 85 percent off its highs? Had they been able to stay in operation for just another year, the dot com, socks they were shorting would have tanked and they would have made back most, if not all, of the losses from when the tech bubble was first inflating. But after his hedge fund was dissolved, julian robertson did not just go home quietly. He actually made more money after tiger management's collapsed than he made.

While he was running it. Many of the analysts working at tiger management went to start their own hedge funds, julian robertson provided seed capital to many of them, as they were. First starting up. These hedge funds came to be known as tiger seeds.

There are about 30 tiger seeds operating today, which collectively manage hundreds of billions of dollars. One of them was started by a young man named bill huang. It was called tiger asia before he converted to a family office called arcago's capital management. If you haven't been living under a rock, you remember how huang used more than five times leverage to pump up stocks like viacom, ultimately leading to a meltdown of epic proportions.

Julian robertson is perhaps the most influential investor of the past century. He is still alive today and his net worth sits at 4.8 billion dollars. Most of his wealth comes from investing in tiger seeds, hedge funds. He also continues to run tiger management as a family office managing his own money.

He was a great investor who just got unlucky with the timing during the tech bubble. One modern investor, who has a very similar investing style to julian robertson, is david einhorn, the founder of green light capital. He shorted the so-called bubble basket of stocks, which he thought were overvalued. These included high growth companies like tesla and amazon strategy didn't work out and his hedge fund has lost roughly eighty percent of his assets under management since 2015..

The stories of julian robertson and david einhorn show how difficult it is to be a value investor, especially when you short high growth stocks. After just a couple bad years of performance, the investors can lose their patience and pull their money out. Tiger management is still operating today as a family office and publicly reports its holdings every quarter. Thus we can track what julian robertson is investing in his single largest holding is sallie mae or slm.

Corp sally may used to be a government-sponsored entity today, its primary business is creating servicing and collecting private education loans. His second largest position is blackstone, one of the world's largest private equity investment companies. His third and fourth largest positions are facebook and microsoft, which need no introduction. His fifth largest position is flywire, a small cap payment processing company, which ipo'd in may of 2021, alright guys that wraps it up for this video.

What do you think about julian robertson? Let us know in the comments section below, if you like, this content, make sure to hit the like button and subscribe. So you don't miss future uploads as always. Thank you so much for watching and we'll see in the next one wall, street millennial signing out.