George Soros The Quantum Fund
George Soros is one of the founders of The Quantum Fund along with the “Investment Biker” Jim Rogers. Soros was one of the first investment managers in the world to develop the hedge fund concept and it made him and co-founder Jim Rogers billionaires.
Soros’s most famous investment was when he “broke the bank” in England by betting billions against the British pound on “Black Wednesday” in 1992. Forbes has Soros ranked at 27 in its “richest in America” list with a net worth tipping the scales at $8.5bb. Soros emigrated to England in 1947 and graduated from the London School of Economics in 1952 . While a student of the philosopher Karl Popper , Soros funded himself by taking jobs as a railway porter and a waiter at Quaglino’s restaurant where he was told that with hard work he might one day become head waiter.
Soros and his management firm differ in many ways from most of the other investors we Coattail. For starters, his fund, The Quantum Fund, is not a mutual fund, but rather a hedge fund. The hedge fund industry has since grown into a monster financial industry that typically takes “2 and 20″, that is 2% of the funds invested upfront as a management fee, and 20% of the profits as a performance fee. Hedge funds now manage trillions of dollars. This concept has probably made more billionaires than any other single industry and it was George Soros who was the the first to develop it.
Soros has a keen interest in philosophy. Periodically he has studied under and corresponded with philosopher Karl Popper. Soros has been criticized for his large political donations. He pushed for the Bipartisan Campaign Reform Act of 2002 which was intended to ban “soft money” contributions to federal election campaigns (but obviously the law was ineffective). Soros has had financial setbacks, though. His fund posted a 22.9 percent loss in 1981, when he miscalled the direction of interest rates and took a bath in bonds; it shed $800 million in the 1987 market crash, which Soros had as much as predicted in The Alchemy of Finance earlier that year but had expected would hit first and with most force in Tokyo.
Soros is one of what in medieval days were called Hofjuden, the “Court Jews,” who were deployed by the aristocratic families. The most important of such “Jews who are not Jews,” are the Rothschilds, who launched Soros’s career. Soros manages the Quantum Fund, a $1.8 billion mutual fund whose net asset value per share has risen astronomically since he founded it in 1969, from $41.25 to $9,793.36 recently. In the last 18 years, the Quantum Fund has failed to show a profit only once, in 1981, according to Lipper Analytical Services Inc., a research organization that tracks mutual funds. Soros’ Quantum Fund is claimed to have achieved an average annual yield of more than 30% for 31 years. That kind of yield is not achievable without highly risky leveraged bets.
The Quantum Fund’s most famous — and among its largest — gains came from its bet against the British pound in 1992. After shorting it, Soros made about $1 billion on the bet, in the process nearly breaking the Bank of England. The Quantum fund, a pool for hugely wealthy investors that profited by anticipating and exploiting price swings in foreign currencies, is famously iconoclastic. Soros recently passed much of the fund’s management to his two grown sons, Robert and Jonathan, but under his direction it rejected the prevailing orthodoxy about the rationality of the market in favor of the notion that markets were prone to chaos and distortions stemming from human error.
The Quantum fund ushered in a new era of global macro trading and inspired a hoard of copycats and spinoffs that, through massive capital inflows and outflows, can now change the fate of nations. In the book Money Masters of Our Time, he speaks about that time: “the most important thing in my life was work.
The Quantum Fund’s 1992 short sales of sterling arguably helped move Britain’s exchange rate toward its proper equilibrium, and its 1997 baht selling should have alerted Thai authorities to a similar problem. This is how investors should operate — making markets more efficient — yet too often fail to.
Investors may experience a gain or loss when they sell their units in any mutual fund. Investors gave George Soros money and he took bold gambles with it: in return he and his team took 20 per cent of any profits. It was a fabulously lucrative business model, turning Soros into one of the first billionaires of the industry.
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