Michael Steinhardt forged the model for making hedge fund billions before exiting the game. With WisdomTree, he’s back to upend Wall Street again–this time, with the little-guy investor at his side.
During the three decades that Wall Street grew up, morphing from a gentlemen’s investment club into a global financial colossus, Michael Steinhardt emerged as the world’s greatest trader. From 1967 to 1995 his pioneering hedge fund returned an average of 24.5% annually to its investors, even after Steinhardt took 20% of the profits. Put a different way, $10,000 invested with Steinhardt in 1967 would have been worth $4.8 million on the day he shuttered his fund. (The same investment in the S&P would have been worth $190,000.) It was a performance that landed him on The Forbes 400 in 1993, with a net worth estimated at more than $300 million.
Trading is all about timing, and by one key measure, he failed. He walked away while in his 50s, just as the hedge fund industry, which he helped create, was becoming the most potent moneymaking machine ever invented. Had he stuck with it, he very likely would be one of the very richest people in the world, mentioned in the same breath as George Soros (Trades, Portfolio) ($20 billion) and Steve Cohen ($9.4 billion). “I thought there must be something more virtuous, more ennobling to do with one’s life than make rich people richer,” says Steinhardt. “There’s no sin in making rich people richer, but it’s not the sort of thing from which you would go straight up to heaven.”
Steinhardt says this in the most gentlemanly–even grandfatherly–way, a far cry from the notoriously short-tempered “screamer” of his heyday. He leisurely charts his life away from Wall Street, a tale that touches on politics (he was an early Bill Clinton supporter), Jewish cultural values (an atheist, he is nonetheless an ardent supporter of Jewish causes), animals (his country estate houses one of the world’s largest private zoos) and even a type of French field strawberry, the fraise du bois, that his wife, Judy, once tried to grow commercially.
But sitting behind a glass desk in his thickly carpeted Manhattan office, Michael Steinhardt has another message that Wall Street should take note of: He’s back, and rather than play by the rules that he helped establish, he’s blowing them up, positioning himself as an advocate for the little guy–and making himself a new fortune in the process.
Steinhardt is chairman of the board and, with a 14.7% stake worth some $330 million, the largest single stakeholder in WisdomTree Investments, the ETF shop created by Jonathan “Jono” Steinberg, son of the late corporate raider Saul Steinberg, who famously flamed out at the end of his career. Steinhardt was way early on hedge funds–his was among the first dozen (there are 8,000 today). He thinks exchange-traded funds have similar disruptive potential, with individual investors (and some savvy operators like him) reaping the benefits.
“I cared about one thing,” Steinhardt says of his trading years, “and that one thing was having a better performance than anybody in America.” He later adds: “I want to phrase this in the strongest possible way: Jono Steinberg has been, from my perspective, the single greatest manager in the world of money management during the last eight or nine years.”
Whoa! To the extent that Wall Street has a take on Jono Steinberg, it’s that he’s married to Maria Bartiromo, business television’s “money honey.” In the 1980s he failed to complete his undergraduate business degree at Wharton (Steinhardt’s alma mater), despite the fact that his father’s name is carved on one of the buildings. He later used his family’s money to rechristen a tout sheet called Penny Stock Journal into Individual Investor magazine, which went bust in 2001. Most critically, the man Steinhardt calls the greatest money manager of his generation has never managed a significant amount of anyone else’s money.
Continue reading: http://www.forbes.com/sites/michaelnoer/2014/01/22/michael-steinhardt-wall-streets-greatest-trader-is-back-and-hes-reinventing-investing-again/