The $11 Billion Man Hedge fund guru Bruce Kovner earns giant returns, but doesn't talk--most of the time.
(FORTUNE Magazine) – Do you know Bruce Kovner? You should. He's one of the biggest cats on Wall Street. Kovner runs the largest hedge fund group in the world: $11 billion Caxton Associates in New York City. Like almost all of the heavy hedgies, Kovner is ultrasecretive about his work. He doesn't hang out with J. Lo and Ben, nor does he cut ribbons at new hospital wings, nor, for that matter, does he do press interviews. (Kovner even declined an invitation to speak with Mr. Street Life!) But if you poke around a bit--which I did--you begin to get a picture of what he is all about.
First of all, Kovner, 58, doesn't resemble a testosterone-saturated master of the universe. He's more like a soft-spoken, intellectual, academic type. Which makes sense, because he taught for a while at Harvard and Penn and did consulting work for Congress. But wait, how would I know what Kovner looks and acts like? Because of a videotape and transcript I turned up recently: a taped interview that Kovner did last year with an investor (David Smith, who manages a fund of funds for GAM) and a discussion he participated in four months ago in Europe.
Kovner's career path has been circuitous. He graduated from Harvard College in 1966 but dropped out of the Kennedy School before he completed his Ph.D. He drove a cab in New York and studied harpsichord at Juilliard. Then the money bug bit him. "I started paying attention to financial markets," he said in the taped interview. Soon he began to trade commodities. "I caught hold of the great bull market in soybeans in 1977," he said with a grin. "I had no idea what I was doing, incidentally."
Scary stuff. According to the book Market Wizards, the trader, then a novice, went from $3,000 to $45,000 (big money for him in those days) and back down to $22,000 in short order, which left him exhilarated--and shell-shocked. But Kovner was hooked and went to work at the now legendary Wall Street firm Commodities Corp. Then he struck out on his own. "In 1983 I set up Caxton Corp.," he said. "It's been an interesting and happy ride since."
Kovner is what's known as a macro trader. He focuses on commodities and currency and uses fundamental analysis as well as charts and technical analysis. He loves following global economies--New Zealand monetary policy, for instance. "I have no bias toward any of the markets," he said. "I am just as happy a trader in a bear market as in a bull market, rates up or down, commodities up or down."
So what does Kovner think of the markets now? Not surprisingly, he wasn't exactly effusive at the European conference in May. Kovner said he was short U.S. stocks. Noting that deflationary pressures were still very strong, he predicted that between now and the presidential election in 2004 "there will be effective premeditated policy decisions that will stimulate the U.S. economy. So the macro environment for U.S. stock has dramatically improved...." I would bet that Kovner isn't short, or as short, as he was then. Also, he saw the dollar and yen depreciating more, and said, "We still have a very substantial move in gold ahead of us. The same could be true for a number of other commodities. We may be in for a ride in commodities the likes of which we haven't seen in a while." Kovner cited oil and natural gas as examples. As for bonds, he expressed concern about rising rates "for any investor with a two-year or more time horizon."
To some, these are mere macro musings, but for Kovner, it is the stuff of making big money. Again, we don't have a lot of hard and fast info, but here's what we know. Reports say Caxton has returned 28% annually since inception. (Not a bad two decades!) According to Institutional Investor, Caxton returned--net of fees--31% in 2001 and Kovner made some $500 million personally that year. Last year the fund returned more than 26%. By the way, how much of the $10 billion is Kovner's personally? Half? More? Certainly he's a billionaire. Caxton president Peter D'Angelo won't comment.
As for Kovner's personal life, as you'd expect, there's not much flash and dash to it. Three years ago he did buy the International Center of Photography's four-story townhouse in Manhattan for $17.5 million--but that's a drop in the bucket for Kovner. He owns a 200-acre estate in upstate New York, prints high-quality, limited-edition Bibles and is now the chairman of the board at Juilliard. Kovner has also been outspoken on the plight of public school children, especially in New York City, and has helped head up the School Choice Scholarships Foundation, which awards needy children money to attend private schools. Sounds like good stuff to me. I'd be interested in hearing more--much more--wouldn't you? I wish Kovner weren't so intent on hiding his light under a bushel.