It is fair to say that the decision by legendary investor George Soros to stop managing other people’s money marks the end of an era that began four decades ago.
His sons, Robert and Jonathan, have told investors in Soros Fund Management Llc that new US regulations would force the hedge fund to register with the Securities and Exchange Commission, part of a series of moves by the Barack Obama administration to regulate hedge funds. Soros will now only manage his own money, of around $25 billion (and there is no typo here). Earlier, Stanley Druckenmiller, a former Soros associate, also decided to return money to investors and focus on managing his own wealth.
In India, Soros never achieved the same reputation as Warren Buffett did. Buffett’s buy-and-hold strategy is widely admired among the best private investors in India and many make the annual pilgrimage to Omaha when Buffett chairs the annual investor meeting of his Berkshire Hathaway.
Neither Soros’ great victories, such as earning $1 billion in a few weeks by betting against the British pound and eventually bringing down the unsustainable European exchange rate mechanism (ERM), nor his philosophical speculations and philanthropic activities, the former inspired by the works of Karl Popper and the latter by an enthusiasm to build an open society in countries once ruled by communism, have had much resonance in India.
The retirement of people like Soros and Druckenmiller indicates two possible trends. First, the clear intention to regulate the more footloose parts of the financial sector by Western governments in the aftermath of the financial crisis could, if taken to their logical outcome, change the entire dynamics of the hedge fund industry. Second, it raises uncomfortable questions whether hedge funds today have become too big and too numerous for them to pursue the sort of fleet-footed moves that made them such a success.
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