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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 31� 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. |
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