The following is the letter to shareholders from George Soros sent on Friday, April 28, 2000.

  

To the Shareholders of the Quantum Group of Funds:

 

Both Stan Druckenmiller, portfolio manager of the Quantum Fund, and Nick Roditi, portfolio manager of the Quota Fund, have decided to retire from active management of their funds.  Stan will take a well-deserved sabbatical after 12 strenuous years managing the Quantum Fund.  Nick Roditi will cease macro investing and gradually transfer management of the assets to a trusted outside adviser.  Shareholders will be given the choice of remaining in Quota Fund, moving to the portion managed by this adviser or taking cash. Both Stan and Nick will remain associated with the firm, and retain substantial investments in the funds.

 

These personnel changes have prompted me to undertake a thorough reorganization of Soros Fund Management. We have come to realize that a large hedge fund like Quantum Fund is no longer the best way to manage money. Markets have become extremely unstable and historical measures of value at risk no longer apply. Quantum Fund is far too big and its activities too closely watched by the market to be able to operate successfully in this environment. My own needs are for a more reliable stream of income to fund my charitable activities. To meet those needs, we shall convert Quantum Fund into a lower risk/lower reward operation. We shall engage in a variety of less volatile macro and arbitrage strategies, with a smaller portion of the assets devoted to stock picking on the long and short side.  The allocation of funds between the various strategies may vary from time to time depending on market conditions and other considerations. To reflect the changed character of the fund, it will be renamed Quantum Endowment Fund.

 

Duncan Hennes will be in charge of risk management.

 

At the same time, we intend to establish some of our existing management teams to whom I am willing to entrust a portion of my own funds as smaller independent funds and we shall be on the lookout for additional teams. Quantum Emerging Growth will continue in its present form. In this way we shall maintain a capacity for equity investing.

 

The name change will allow the history of the Quantum Fund to be preserved as "a monument more lasting than bronze".  During its 31½ year history, Quantum provided its shareholders with an annual return in excess of 30%.

 

An investment of $100,000 in the fund at its inception would be worth approximately $420 million today, provided that dividends could be reinvested at the net asset value of the fund (which was not the case). The Quantum Endowment Fund will not seek to achieve such high returns.

 

It has been the tacit understanding between my shareholders and me that I invest their money as I invest my own.  Accordingly, we shall offer the shareholders of the Quantum Fund the choice to stay with the Quantum Endowment Fund, to switch to any of the specialized funds when they are established, or to redeem their investment.  In preparation for this announcement we have raised sufficient cash to ensure that all shareholders who wish to redeem can be paid out fully in cash.

  

We shall continue our successful Private Equity and Real Estate businesses.

  

In taking these steps my objective is to establish an organization that can efficiently administer my funds, and those of other shareholders, even beyond my lifetime.

Return to story