Kyle Bass Interview And The Investing Rules Of George Soros by CSinvesting
Kyle Bass Interview
The investing rules of George Soros
George Soros is widely regarded as one of the preeminent investors of our time after compiling a track record over four decades from 1969 to 2009; that is, without question, Hall of Fame material. Given that there are simply not that many investors who have track records of this duration, it is tough to make direct comparisons at all, and making comparisons across decades is tough because of the very different economic and market environments that exist from decade to decade. For example, making good returns from 1969 to 1982 was pretty darn tough as the S&P 500 was essentially flat during those 14 years, while it was pretty easy to make solid returns from 1982 to 2009 as the S&P 500 compounded at 12.3% and went up nearly 20 times (when you put the whole 41 year period together the S&P 500 compounded at 9.4% and turned a $10,000 investment into just under $400,000).
Interestingly, there is one investor who was in the market the entire time as Soros (and is often touted as the world’s greatest investor, for some pretty good reasons related to consistency and longevity) and actually has a track record that we can stack up side by side with George to gain some perspective. Warren Buffet closed his private partnership (BPL) to new capital in 1966 and, by 1969, had transitioned to running as a closed end fund named Berkshire Hathaway (named after the original textile manufacturer that he bought a controlling interest in and later took outright control). So when Soros started taking outside capital into his Double Eagle partnership in 1969 (where he was an Associate at Arnhold and S. Bleichroeder), we had ourselves a horserace. George eventually spun himself out in 1973 into a private firm, Soros Fund Management, and later established the Quantum Fund as their primary investment vehicle. Soros was the primary Portfolio Manager for many years, but was very successful in building an extraordinary team of very talented investors to work at Quantum and he eventually ceded the CIO responsibilities to Stanley Druckenmiller (who also has a Hall of Fame track record of his own in compounding client wealth in his fund, Duquesne Capital). Soros became less active in the late 2000s and Quantum actually returned all outside capital in 2011, converting to a Family Office to concentrate on running the Soros family and Foundation assets.
So for the 41 years from 1969 to 2009, we have good data on Quantum vs. Berkshire (thanks to Veryan Allen at @hedgefund who collected the information and calculated the returns) and the results are nothing short of astonishing. Warren compounded wealth over that period at a stunning 21.4% (more than double the S&P 500 return over the period) and would have turned a $10,000 investment into $28.4 million. Soros, however, did a just little bit better, compounding at 26.3% (which doesn’t sound like that big a difference) and, through the miracle of long-term compounding, turned that same $10,000 original investment into an extraordinary $143.7 million. Now clearly very few investors benefitted completely from any of these three track records. Those numbers assume that you reinvest all the dividends, never take any distributions and invested at the beginning and stayed invested until the end. Forty-one years is a long time to stick to one strategy. In fact, to provide some perspective on how hard it is to stick to any strategy long-term, we have data that shows that over the past 20 years (a period only half as long as the Soros period) the S&P 500 Index has compounded at 8%, yet the average investor in mutual funds has only made 3% (from the Dalbar Study) because investors are not very good at sticking to a strategy and letting compounding work for them.