Book Bits Interview: Dan Strachman On Julian Robertson’s Legacy

Julian Robertson was one of the most successful investors of all time, perhaps the most successful. When he died last week, he left an investment legacy that will likely remain an exemplar of victory over market beta that few, if any, will be able to match in the years ahead. By one estimate, his Tiger fund generated a stellar 25% a year over two decades – a track record that easily puts Robertson in the highest ranks of alpha generators.

His strategy was deceptively simple.  “Our mandate is to find the 200 best companies in the world and invest in them and find the 200 worst companies in the world and go short on them,” he once said. “If the 200 best don’t do better than the 200 worst, you should probably be in another business.”

For some perspective Robertson’s legacy, reached out to Dan Strachman, who wrote Julian Robertson: A Tiger in the Land of Bulls and Bears. Strachman, managing director of A&C Advisors LLC, a hedge fund consultancy, observes that while Robertson’s overall strategy was straightforward, his results were extraordinary for a relatively simple reason: value investing works over the long run.  

Although it’s tempting to think that Robertson’s success was one of those gifts that can’t be learned, he proved otherwise, as his long list of proteges – many successful investors in their own right – reminds.   

What are the key lessons for investing that flow from Julian Robertson’s stellar long-term record as a portfolio manager?

The simple answer is that traditional value investing/Graham and Dodd is what works over the long term, regardless of market conditions. Julian’s success was based on applying value ideas and methodology to various asset classes. 

 Some critics say that Robertson’s long-term performance record was due to a combination of luck and running money during an especially opportune period for markets. Valid?

There is some truth to that — a rising tide raises all boats. But his real success is his ability to teach managers the skills they needed to be successful over the long term.

 Robertson inspired a long list of celebrated protege managers who initially worked for him. What do you think accounts for his unusually broad and far-reaching influence in money management?

There is no one like him and perhaps will never be — he is the GOAT when it comes to investment management. The reach of the Tiger tree of managers is unprecedented and something that will forever influence the way money is managed.

Some pundits summarize Robertson’s investing strategy as own the best companies and avoid/short the worst ones. Why was Robertson so unusually successful with such a basic concept whereas so many other managers earn middling results or worse even though they follow a similar strategy?

Most managers don’t know how to short – let alone really go long. They simply ride various waves. There are very few original money managers out there. Julian was one of them – most of the cubs are as well. Otherwise, the list is very short.

How much of Robertson’s success is linked to running money in a hedge fund structure? Do you think he could have achieved similar results over such a long period in a conventionally-run portfolio of long-only positions?

Long-only does not work. The long-only “investment management industry” should really be called the “long-only asset gathering industry.” Sure, if the markets rise these asset gatherers make money but in the long run – pun intended – they don’t because quite frankly markets don’t always ride a wave higher. Julian was successful because he had all the arrows in his quiver to navigate and trade the markets. He was not limited to making money only when the markets were on the uptick.

Excerpt from Julian Robertson: A Tiger in the Land of Bulls and Bears:

Robertson’s uncanny ability to believe in himself and others was and continues to remain a characteristic that sets him apart from most other hedge fund managers. He understands his strengths and his weaknesses and understands how to compensate for both. He has the ability to stick to something when everyone else has bailed out, and has the ability to make incredibly important decisions almost in an instant. Most people do not possess this trait. It has proved successful for him time and again throughout Tiger’s unique run.