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Robertson: high on hedges
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October 12, 1998: 6:37 p.m. ET
Tiger Management's master defends Fed, Russia bets; vows a hedge comeback
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NEW YORK (CNNfn) - Five days after suffering his largest one-day loss ever, hedge fund manager Julian Robertson Jr. on Monday applauded the U.S. Federal Reserve for acting swiftly to rescue a troubled rival and predicted a bright future for hedge funds once the current tempest subsides.
Last Wednesday, Robertson's Tiger Management, which began the month with about $20 billion under management, saw nearly $2 billion of its investments wiped out in a matter of hours as the Japanese yen surged against the U.S. dollar.
As panic spread through the market, Tiger's losses were compounded by a sharp erosion in stock values.
Despite the hit, however, Tiger is still up about 10 percent for the year, making it a relative standout among its risk-ravaged peers, many of whom have stumbled in recent weeks.
Addressing a hedge fund conference in Bermuda Monday, Robertson depicted the hedge fund industry as down, but not out.
Asserting that "we're always taking looks at our risk procedures," Robertson denied he had any plans to alter his basic investment strategy in the wake of the $3.6 billion bailout of Long Term Investment Management. (290Kb AIFF) or (290Kb WAV).
Robertson also defended his fund's investments in Russia, where a major debt default and effective ruble devaluation over the summer resulted in a $600 million loss. In the wake of the hedge fund debacle, many analysts have faulted fund managers for what some view as a superficial approach to Russian investing.
"We thought the Russian bet was one of the better ones we made this year," Robertson said. "It didn't work out. But we did a lot of work on it. Our thesis was that the resumption of the Cold War was more expensive and dangerous than the giving of a $20 billion loan to Russia. The Cold War is a trillion dollar proposition."
Trying to dispel the gloom that has engulfed the risk-taking community of investors, Robertson told the conference that "unlike this week on Wall Street, this is really a fun business, most of us would work in it for free."
Asked to speculate on the chances for a hedge-fund comeback, Robertson was sanguine: "What has happened will cause fallout and regulation, but 10 years out, the hedge fund industry will be stronger then ever."
Robertson said he saw "opportunities in longs and shorts in Asia" - "that's always been our philosophy".
But he was most vehement in his praise of the U.S. central bank in spearheading the LTCM bailout.
"It was like a judge in bankruptcy court," he said. "I applaud the Fed - they acted and took action. The Congressmen who criticized (them) were judgmental."
One of Tiger Management's largest equity assets is the air carrier, US Airways Group, in which the fund owns 19 million shares. Robertson reiterated his support for US Airways Monday, calling it a "sensational" time to buy.
On Friday, Tiger Management, which now owns about 20 percent of US Airways Group stock, submitted a filing seeking to increase ownership in US Airways for Jaguar Fund, Tiger's largest fund.
He also recommended a school of financial stocks, including Morgan Stanley, Bear Stearns, Well Fargo and Bank America, which analysts say may be extra vulnerable as traders seek to shed their positions and limit exposure to risky markets.
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