Michael Steinhardt Is Not Very Long Right Now: Recent Interview

Legendary hedgie Michael Steinhardt, now the Chairman of WisdomTree, sat down with CNBC for an interview today.  Here's some comments from his talk:


Michael Steinhardt's Latest Interview

On his investor personality: "I have an innate inclination towards bearishness, that's the way I am.  We each have our own personality and character composition and mine is tended toward the bearish side."


On whether investors should wait for a pullback in the market after the big run-up: "I'm not sure it's going to stop, but I think that one must marvel at where the stock market is in relation to the rest of world, in relation to the economics, the politics... it's not a glorious happy time."


On where he's putting money these days: "I have a number of stocks which are mostly specialized itsy-bitsy things.  I own, I was Chairman of a company called Genie Energy (GNE)."  


On his average net long exposure:  "I managed money for 29 years, and my average exposure in my funds for those 29 years was between 30-35% net long, now that's probably as bearish as anybody was in that period.  I think having lower risk is a virtue.  I'm not sure I'm a perma-bear."


When asked if he's very long right now, he replied "no, no I'm not."

Jim Chanos of Kynikos Associates was also in the media room during the interview and he noted that Steinhardt is one of the best short sellers there is.

Embedded below is the video of Michael Steinhardt's interview with CNBC:



For more on this legendary investor, head to Steinhardt on the differences between past and present hedge funds.

Michael Steinhardt on Differences Between Past & Current Hedge Funds

Michael Steinhardt founded Steinhardt Partners in 1967 and generated 24% average annual returns over a 28 year period. He was one of the true pioneers in the industry and he recently sat down with CNBC for an interview.

The former titan talked about his time as a hedge fund manager, saying "When I was doing it, it was an elite phenomenon. Now it ain't an elite business anymore." Steinhardt is now the chairman of ETF firm, WisdomTree.

Hedge Fund Differences: Then & Now

Performance: He notes that the main difference between hedge funds then and now is the goal of performance. He targeted (and achieved) outsized returns, while many funds today are happy cranking out "only" 12-14% gains.

Assets Under Management (AUM): Steinhardt also slipped in his signature phrase of 'diseconomies of scale,' referring to the fact that as assets under management (AUM) grew, true outperformance was harder to achieve. He chastised modern hedge funds as asset gathering behemoths with goals of making money from the assets (management fee) rather than making money from performance.

Impact of Fund Size on Returns: This is a big talking point amongst investors, especially as of late it seems. The classic example, of course, is John Paulson. His hedge fund Paulson & Co catapulted to fame with his stellar returns shorting subprime. As his AUM has swelled, investors have raised concern and Paulson addressed his fund size in his year-end letter.

Maverick Capital's hedge fund founder Lee Ainslie also wrote a quarterly letter to refute the notion that large fund size negatively impacts a manager's ability to generate returns.

Steinhardt's point (and it's a good one), is that regardless of whether or not these funds generate performance, the funds are still making money due to the management fee on a sizable chunk of assets.

Hedge Fund Herding: The hedge fund legend also points out that so many managers are using similar strategies these days, whereas he was one of the few employing them in his time. This is yet another topic that high profile funds have been forced to address via investor letters. Viking Global's Andreas Halvorsen wrote about hedge fund herding here (scroll down in the post).

In short, Steinhardt raises some valid points about how hedge funds have slightly strayed from their original incarnation. The reason? Money, of course.

He's not alone in his concern, either. After all, so many prominent funds wouldn't have to address such issues had they not seen continuous signs of concern from their investors.

You can watch Steinhardt's interview below where he also gives his macro outlook and oddly enough goes on a tirade against Warren Buffett (email readers come to the site to watch):



In the video, Steinhardt also briefly mentions that he remains short 2 year Treasuries. You can also read his past thoughts on why he thinks treasuries are foolish.

Hedge Fund Panel Video: Steinhardt, Gerstenhaber & Cooperman

Once in a blue moon, you get something truly worth watching out of CNBC and this is one of those blue moons. Here's a great hedge fund panel video featuring none other than industry legends Michael Steinhardt (previously of Steinhardt Partners, now with WisdomTree Investments), Leon Cooperman of Omega Advisors, and David Gerstenhaber of Argonaut Capital. RSS & Email readers: come to the blog to view the video.

Hedge Fund Legend Michael Steinhardt Says Treasuries Are Foolish

The legendary hedge fund manager Michael Steinhardt has recently voiced his distaste for Treasuries over the long-term. In a recent Bloomberg television interview, he said, "To be a long-term investor in Treasuries at this point I think is foolish. The rates are low, and the danger is high." If you're unfamiliar with Steinhardt, he ran one of the first truly successful hedge funds, garnering a 20% return each year for almost thirty years. His Steinhardt Management Co, which he opened in 1967, earned 24% a year for multiple decades. He truly is a successful hedge fund manager with a proven long-term track record.

And, with that in mind, it's interesting to see that Steinhardt has joined numerous other well-tenured investors in his dislike of treasuries. He thinks that government bonds are not safe investments and shares Jim Rogers viewpoints on this subject. Rogers, of course, has a solid background as well, having run the successful Quantum fund with ex-partner George Soros. So, we now see that both Steinhardt and Rogers see Treasuries as poor investments for the future, as we noted in our Jim Rogers portfolio update. In the past, we here at Market Folly have even gone as far to lay out the rationale behind shorting treasuries. (That play has picked up steam as of late and we still need to do a follow-up post on that subject).

Steinhardt goes on to say that he thinks the current market rally will not last and that we are not out of the woods yet. He says, "The economy is still a scary place. My net feeling is that this rally doesn't have all that much more to go and the dangers out there remain consequential." Clearly he sees this as a bear market rally and thinks we have large fundamental problems still unsolved.

Nowadays, Steinhardt is the chairman of WisdomTree Investments, a firm that creates exchange traded funds (ETFs). Steinhardt also has an autobiography out entitled No Bull. It is a fascinating read detailing the life of one of the first true hedge fund managers out there, as his firm survived the collapse of the 1960's. This book also recently appeared on hedge fund Blue Ridge Capital's suggested reading list, in their biographical/historical category. We'll continue to track Steinhardt's words of wisdom whenever he makes a sporadic appearance.