Soros suffers huge loss, to avoid risk

NEW YORK, APRIL 28: Unveiling a shake-up of the world's largest hedge fund after a 20 per cent drop this year, US financier George Soros s...

NEW YORK, APRIL 28: Unveiling a shake-up of the world’s largest hedge fund after a 20 per cent drop this year, US financier George Soros said on Friday his days of wagering billions in speculative bets on global markets were over.

Announcing a massive overhaul of his flagship $8.5 billion Quantum Fund, to be relaunched as the Quantum Endowment Fund, Soros said that he planned to "manage my money differently," taking fewer risky and speculative positions. "It is my desire to reduce equity market exposure due to high valuations and high volatility, Soros said.

He added that losses also stemmed from a wrong-way bet on the euro, the single European currency, which has fallen nearly 25 per cent against the dollar since its introduction in January 1999. Stanley Druckenmiller, who will resign as Quantum’s chief strategist after the fund’s assets shrank by more than $2 billion in the past four months, said he had not expected such sharp and rapid losses.

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"I screwed up. I should have got out (of the Nasdaq index) in February," Druckenmiller said. Quantum has lost 21.69 per cent in value this year and its assets have shriveled from $10.36 billion at the end of 1999 to $8.25 billion in mid-April. The Nasdaq composite index is down around 25 per cent from its all-time peak of 5,048.62 hit on March 10.

Soros, a Hungarian-born multi-billionaire, said that Quantum had enough liquidity to meet any investor redemptions. Quantum had scored big in 1999, ending up 35 per cent for the year after switching into high-technology stocks late in the year.

But once-high flying tech shares have been buffeted by extreme volatility and major indices have suffered severe declines which gained speed over the past month. "This business is a bit like a drug. When you are doing well, it’s hard to quit," Druckenmiller said, noting he wanted to leave last year when the fund was still performing well.

Soros, nicknamed "the man who broke the pound" after making a successful $10 billion bet against sterling, precipitating the currency’s exit from the European Exchange Rate Mechanism in 1992, has not seen all his big financial bets succeed in recent years.

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He failed to call the 1987 global stock market crash and in 1994 lost substantial sums of money on short-yen positions, with Quantum reportedly losing $ 600 million in a single day in February 1994. He was also the target of vitriol from critics such as Malaysian leader Mahathir Mohamad, who blamed Soros funds for bringing about the Asian financial crisis in 1997-1998. "Mahathir will be depressed because he won’t have anyone to blame," Soros said.