NEW YORK CITY (CNNfn) - Billionaire investor George Soros, captain of the world's largest hedge fund, said Friday he had lost the magic that made him one of the world's most successful investment managers.|
Soros, whose global funds control some $11 billion in assets, was forced to overhaul his flagship Quantum Fund in April after it suffered heavy losses as the value of investments in Internet and technology stocks plummeted.
"I think I lost my touch some time ago. I'm like an aging boxer that should not go into the ring," Soros said in an interview with BBC television.
This statement came just one day after Soros spoke with conservative optimism of a new fund he's launching on July 1 -- a fund with up to $6.5 billion under management -- and one day after he said "everything" about the reorganization of his funds had gone "according to plan."
CNNfn's attempts to reach Soros for clarification were unsuccessful.
Hard times for hedge funds
Soros Fund Management is just the latest big hedge fund group to lose billions of dollars. In March, Julian Robertson's Tiger Funds closed shop after the assets under its management plunged from about $20 billion in 1998 to about $6 billion in March.
In 1998, Long-Term Capital Management, the hedge fund run by former Salomon Inc. Vice Chairman John Meriwether, roiled markets when the fund made a bad bet on interest rates. The Federal Reserve stepped in to negotiate a $3.6 billion bailout plan. The fund ultimately paid back $1.3 billion to investors, but many on Wall Street regarded the fund's near-collapse as a warning sign for highflying hedge funds.
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Hedge funds are unregulated pools of money that use riskier strategies such as derivatives and short-selling to boost returns. By leveraging their investments, hedge funds can boast substantial returns. However, when the bets go against the fund, the losses can be huge.
A more conservative approach
Soros said Thursday that his new fund, Quantum Endowment Fund, which will replace the Quantum Fund and the Quantum Emerging Growth Fund, would be more conservative than traditional hedge funds, with roughly half of its assets invested in macro and arbitrage plays and the other half in stock-picking strategies on the long and short side.
Soros said Quantum Endowment Fund will use less leverage and aim for more stable returns of about 15 percent. The fund, which previously leveraged as much as 100 percent of its equity, will now only leverage about 33 percent.
Also in contrast to the defeatist remarks reported Friday, Soros on Thursday reaffirmed, with reservations, his belief in the value of the broad investing style known as macro investing that many in the industry say has fallen out of favor. "We are not giving up on macro; we will have a macro team that is looking for those opportunities," he said.
He also said Thursday that the new fund would be more nimble and that it would be tougher for the rest of Wall Street to track his movements. "This has one big advantage: We will be less visible in the market," he said.
Playing cat and mouse with currency
Soros achieved notoriety in 1992 when he humiliated the British government and successfully speculated against the Bank of England's attempt to support the British pound during a currency crisis. He reportedly made $1 billion in a single day from a $10 billion bet against sterling.
Soros also said he believed the European Central Bank should have intervened and bought euros on the international market when the single currency first fell below $0.90.
The ECB's hints of possible intervention have helped to lift the single currency in recent weeks.
A number of euro-zone central banks, including Germany's Bundesbank, have been regularly spotted in recent weeks buying the single currency on electronic dealing systems, although the banks have described these transactions as part and parcel of their normal day-to-day operations.
Soros told the BBC that direct ECB action would have given dealers direction and recommended such buying if the euro posts fresh falls.
"I think intervention is a delicate game -- it's a cat and mouse game. Properly played, the cat usually wins," he said.
--from staff and wire reports