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Tiger Management released the following letter on March 30 to its limited partners, announcing the closure of its funds. In May of 1980, Thorpe
McKenzie and I started the Tiger funds with total capital of $8.8 million.
Eighteen years later, the $8.8 million had grown to $21 billion, an increase
of over 259,000 percent . Our compound rate of return to partners during this
period after all fees was 31.7 percent . No one had a better record. Since August of 1998,
the Tiger funds have stumbled badly and Tiger investors have voted strongly
with their pocketbooks, understandably so. During that period, Tiger
investors withdrew some $7.7 billion of funds. The result of the demise of
value investing and investor withdrawals has been financial erosion,
stressful to us all. And there is no real indication that a quick end is in
sight. And what do I mean by,
"there is no quick end in sight?" What is "end" the end
of? "End" is the end of the bear market in value stocks. It is the
recognition that equities with cash-on-cash returns of 15 to 25 percent ,
regardless of their short-term market performance, are great investments.
"End" in this case means a beginning by investors overall to put
aside momentum and potential short-term gain in highly speculative stocks to
take the more assured, yet still historically high returns available in
out-of-favor equities. There is a lot of talk
now about the New Economy (meaning Internet, technology and telecom).
Certainly the Internet is changing the world and the advances from
biotechnology will be equally amazing. Technology and telecommunications
bring us opportunities none of us have dreamed of. "Avoid the Old
Economy and invest in the New and forget about price," proclaim the
pundits. And in truth, that has been the way to invest over the last eighteen
months. As you have heard me
say on many occasions, the key to Tiger's success over the years has been a
steady commitment to buying the best stocks and shorting the worst. In a
rational environment, this strategy functions well. But in an irrational
market, where earnings and price considerations take a back seat to mouse
clicks and momentum, such logic, as we have learned, does not count for much. The current technology,
Internet and telecom craze, fueled by the performance desires of investors,
money managers and even financial buyers, is unwittingly creating a Ponzi
pyramid destined for collapse. The tragedy is, however, that the only way to
generate short-term performance in the current environment is to buy these
stocks. That makes the process self-perpetuating until the pyramid eventually
collapses under its own excess. I have great faith
though that, "this, too, will pass." We have seen manic periods
like this before and I remain confident that despite the current disfavor in
which it is held, value investing remains the best course. There is just too
much reward in certain mundane, Old Economy stocks to ignore. This is not the
first time that value stocks have taken a licking. Many of the great value
investors produced terrible returns from 1970 to 1975 and from 1980 to 1981
but then they came back in spades. The difficulty is
predicting when this change will occur and in this regard I have no
advantage. What I do know is that there is no point in subjecting our
investors to risk in a market which I frankly do not understand.
Consequently, after thorough consideration, I have decided to return all
capital to our investors, effectively bringing down the curtain on the Tiger
funds. We have already largely liquefied the portfolio and plan to return
assets as outlined in the attached plan. No one wishes more than
I that I had taken this course earlier. Regardless, it has been an enjoyable
and rewarding 20 years. The triumphs have by no means been totally diminished
by the recent setbacks. Since inception, an investment in Tiger has grown
85-fold net of fees; more than three time the average of the S&P 500 and
five-and-a-half times that of the Morgan Stanley Capital International World
Index. The best part by far has been the opportunity to work closely with a
unique cadre of co-workers and investors. For every minute of it, the good times and the bad, the victories and the defeats, I speak for myself and a multitude of Tiger’s past and present who thank you from the bottom of our hearts. |
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