Tags: Soros | Trader | Returns

Ex-Soros Trader Scott Bessent Returns to $25 Billion Firm as CIO

Monday, 19 Sep 2011 01:23 PM

 

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Scott Bessent, who managed George Soros’s European investments for eight years, is returning to Soros Fund Management LLC as chief investment officer to oversee the $25 billion that belongs to the billionaire, his family and foundations, according to a letter sent to employees.

Bessent, 49, succeeds Keith Anderson, 51, who left in July after his performance over the previous 18 months lagged behind peers. At the time of Anderson’s departure, the New York-based firm told clients it would return all outside capital, less than $1 billion, by the end of this year.

“I am pleased to announce that Scott Bessent will join Soros Fund Management LLC,” Soros, 81, wrote today in the letter, calling it part of the transition to a family office. Jonathan Soros will leave the money-management arm to be chairman of the foundation, according to the letter.

In choosing Bessent, Soros and his sons Robert and Jonathan are turning to someone who was mentored not only by Soros but also by former Soros trader Nicholas Roditi and Stanley Druckenmiller, a chief strategist for 12 years who produced 30 percent annualized returns during his tenure.

Bessent will be the fifth CIO to hold the job since April 2000, when Druckenmiller and Roditi left the firm. He was the second-longest tenured investment professional at the firm after Druckenmiller when he left in June 2000.

As CIO, Bessent will be in charge of asset allocation and sizing the biggest trades, managing internal teams, choosing and monitoring external money managers, risk management, putting on hedges and making tactical investments.

Michael Vachon, a spokesman for Soros Fund Management, declined to comment on the hire.

Yale Graduate

While Soros’s flagship Quantum Endowment Fund returned about 20 percent a year, on average, since 1969, its performance suffered in the 18 months or so through June, a person familiar with the firm said in July. In the first half of this year, Quantum lost about 6 percent, the person said, following a gain of 2.5 percent in 2010. Other macro funds returned 5.6 percent in the same year-and-a-half period, according to Chicago-based Hedge Fund Research Inc.

Bessent, who graduated from Yale University in 1984 with a bachelor’s degree, had originally wanted to be a journalist. Instead, he found a job in finance working at Brown Brothers Harriman & Co., and later for the Olayan Group, a Saudi Arabian- based holding company, and then for Jim Chanos’s Kynikos Associates Ltd., a short-only fund based in New York.

Soros Fund Management was Chanos’s biggest client, so in 1991, when Bessent found himself with few ideas on stocks he wanted to bet would fall, he joined Soros, Bessent told Steven Drobny in his 2006 book “Inside the House of Money.”

Macro Trader

He was hired as an analyst at about the same time Soros’s European portfolio manager was struggling. Bessent, who had spent time analyzing European companies, was sent to London to help out two weeks before Soros fired the whole European team, leaving Bessent alone to manage a $300 million portfolio, about a third of the assets in Soros’s main fund then, Bessent told Drobny. By the time he left Soros, he was overseeing about $1.5 billion, generating annualized returns of 26.5 percent.

At Soros, he was also the head of global research and co- head of external-manager selection.

Bessent left in June 2000 to start New York-based Bessent Capital. He raised $1 billion, including $150 million from Soros.

Bessent had been a macro trader at Soros, trying to profit from macroeconomic trends by wagering on stocks, bonds currencies and commodities. He decided to start a European stocks fund and a global equities fund because investors had lost faith in macro funds such as Soros’s, he told Drobny.

Family Office

After losing more than 10 percent in his European stock fund in the first half of 2001 and having investors pull money, Bessent decided to go back to macro investing. In 2005, he returned client capital and converted the firm into a family office.

In 2007, he became director of research and strategy at Protégé Partners, a New York-based fund of funds group. He left at the end of last year and was in the process of forming KeySquare Group LP, a macro fund, when he was recruited by Soros Fund Management. His fund was scheduled to start trading next month.


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