In this third article, we will cover the management principles of this legendary firm.
With the S&P 500 falling a double-digit percentage in the first half, most equity hedge fund managers struggled to keep their heads above water. The performance of the equity hedge fund sector stands in stark contrast to macro hedge funds, which are enjoying one of the best runs of good performance since the financial crisis. Read More
(I) Be Part Of A Global 'Intelligence Network'
One advantage that the Palindrome had was his ‘intelligence network’. His rise from obscurity in the early 1960s to commercial stardom on Wall Street brought him the powerful perks of wealth and fame. With this, he realized that he could access vital people from the upper echelons of government or commerce, and hence, worked hard to develop a professional network.
With this professional network, he could get the opinions of very informed people to ‘stress test’ his own views and alert him to new trading opportunities.
This is one reason I joined the MO Collective is a community of savvy macro traders from all over the world. It’s a place where I can gain perspectives and insights on markets as exotic as South America. It’s a place I can ‘stress test’ my investment strategies or ideas as well.
Widen your circle as much as possible. Network with as many people as possible — you’ll never know when and where your next best idea will come from.
Iron sharpens Iron… Do you have a global ‘intelligence network’? Or are you part of one?
(II) Constantly Source For Talent
This may be a clichéd point, as it’s intuitive to any business person. Without competent and capable people in your firm, there can be no real progress. By allowing talented individuals to flourish and develop, you also allow them to contribute to the overall growth of your organization.
Time must be devoted to finding talented individuals. This process is continuous.
As the Quantum Fund got bigger due to its meteoric rise and stellar performance over the decades, Soros had to expand the organization and train up future successors and leaders of the firm. He was constantly on the lookout for talented macro traders such as Stanley Druckenmiller, Nicholas Roditi and Scott Bessent.
(III) Leverage External Expertise
Soros relied on external expertise to generate the best returns.
In the 1990s, Soros delegated some of his firm’s equity to Victor Niederhoffer after recognising his trading talent.
More recently, Soros allocated a substantial amount of his family office’s assets to bond king Bill Gross when he left PIMCO.
Soros doesn’t care if he’s actually placing the trades. Once he identifies an opportunity, he’s perfectly fine with sourcing outside expertise to help him capture it.
The trading universe is massive. There will be certain markets or segments that are niche, requiring expertise beyond your field or competency. You only need to identify the opportunity, and then find a way to leverage on external expertise.
Take these management principles and lessons from the world’s most famous hedge fund manager. It could take your own investment business to the next level!
Article by Macro Ops