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Back in 1992, he made a reported billion dollars by shorting sterling and helping force the pound out of that half-baked idea known as the European Exchange Rate Mechanism. He was demonized by some for it, but I reckon he did us a big favor.
Since then, George Soros has become one of the world's best-known investors. He's still going strong at the age of nearly 81, after more than four decades in the hedge fund management business. Throughout his career, he has donated an estimated $8 billion for the furthering of free speech and democracy, and to help alleviate poverty and improve education in various parts of the world.
But now he is withdrawing from the hedge fund business to concentrate on his family's interests, and will return around $1 billion to outside investors.
The move is ostensibly due to new regulations in the U.S., which will require all hedge fund management businesses to register with the Securities and Exchange Commission by March 2012 and hand over some details of how their funds are managed.
That $1 billion of outside investors' funds is dwarfed by the $25 billion of Soros family money under management, so Soros and his sons have decided it makes more sense to hand it back and turn the business into a family office.
While many will welcome closer regulatory scrutiny of the U.S. investment industry, it is hard to deny that this move will deprive investors of some quite remarkable investment talent. Though down over the past 18 months, the Soros Quantum fund is said to have returned an average of around 20% per year since its inception in its original guise in 1969, according to someone close to the fund.
Not the first, not the last
The Soros business is not the first to close its doors to outside investors, and it surely won't be the last. Stanley Druckenmiller, a former Soros deputy who left in 2000 to open his own fund, closed his to outsiders last year to similarly concentrate on managing his own cash, and others have since followed suit.
For those finding their money unexpectedly handed back to them, there are plenty of up-and-coming new fund managers waiting to step into the breach as the more experienced ones step back.
Will the new regulations bring a renewed and more open approach to hedge fund management, or are we seeing an end to an era which investors of the future will only hear about as history? Only time will tell.
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