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Man who broke the Bank stops betting other people's money

The Times
By Alexandra Frean, US Business Correspondent
© 2011 Times Newspapers Ltd. All rights reserved

George Soros, the man who "broke the Bank of England" with his $10 billion bet against sterling, has closed his Quantum hedge fund to outside investors, bringing down the curtain on a career lasting four decades.

Mr Soros, 81, indicated yesterday that he would manage money only for himself and his family, suggesting that the imposition of US government regulations on the free-wheeling and secretive hedge fund industry that he helped to create were behind his decision.

He joins a growing list of fund managers who have revamped their businesses. Stanley Druckenmiller, his longtime deputy who helped to engineer the firm's winning bet against the pound in 1992, returned money to investors last year and created his own family office.

Chris Shumway closed his $8 billion fund in February and in March Carl Icahn announced plans to return all outside capital by the end of that month, saying that he no longer wanted to fret about managing other investors' money. Mr Soros's action comes amid a time of turbulence, restricted opportunities and disappointing returns for hedge funds. In May, the average hedge fund lost 1.18 per cent, according to Hedge Fund Research. Mr Soros's fund, which has returned about 20 per cent a year on average over the past four decades, is down 6 per cent this year, according to The New York Times.

But it seems it was the new Dodd-Frank financial reforms, designed to clean up Wall Street after the financial crisis and backed by the Democratic Party that Mr Soros has so generously supported in recent years, that may have tipped the balance in his decision.

Leon M. Metzger, who teaches at New York University Stern School of Business and Yale School of Management, said: "Investment advisers registered with the Securities and Exchange Commission are subject to anti-fraud rules, must make certain disclosures to investors about their financial and disciplinary backgrounds, must retain books, records, and copies of communications, have advertising restrictions and are subject to custody restrictions." Family offices, however, are treated far more leniently under the new rules.

In a letter to Mr Soros's investors, his sons Jonathan and Robert, deputy chairmen of the firm, suggested that the new rules meant that it made more sense to return outsiders' money instead of going through registration. They added that the Soros's Quantum fund had effectively been operating as a family office since 2000.

Mr Soros's fund is understood to manage more than $25 billion, while the amount being handed back to investors by the end of the year is less than $1 billion, according to Bloomberg.

Jim Liew, of the NYU Stern School of Business, said Mr Soros's decision raised the question of whether the regulatory pendulum had swung too far. "In this environment, we need more hedge fund activity: hiring people, raising capital, allocating money, and ultimately stimulating our economy."

Others suggested that the financial regulation provided Mr Soros — now almost as well known for his philanthropic support for liberal causes as for his investment prowess — with a graceful way to bow out of the industry at an advanced age and at a time when his investments were underperforming.

By George

"My peculiarity is that I don't have a particular style of investing or, more exactly, I try to change my style to fit the conditions" 1995

"Well, you know, I was a human being before I became a businessman" September 2000

"If investing is entertaining, if you're having fun, you're probably not making any money" 2006

"The main obstacle to a stable and just world order is the United States" 2006

"I'm only rich because I know when I'm wrong" June 2008 Quantum of Soros 1930 1947 1953 Born 1930, Budapest, Hungary Starts work at Singer & Friedlander Soros emigrates to England to live with his uncle. Attends London School of Economics $ $ $ $ 1956 Moves to New York and joins FM Mayer as an arbitrage trader 1970 With Jim Rogers founds Soros Fund Management, which later becomes Quantum 1963-73 Vice-president of Arnhold and S Bleichroder $ $ Britain's loss before pulling out of the ERM Sep 16, 1992 Black Wednesday $ Government's attempt to prop up the currency to try to stay in the European exchange-rate mechanism $3.4bn Soros's fund short-sells more than $10bn of sterling, profiting from the British $1.1bn Soros earns 2002 French court rules an attempt to take over Société Générale involved insider trading by Soros. He is fined €2.2m $ 2005 Soros invests in the struggling Channel Tunnel operator Eurotunnel $ 2009 Soros says we are facing global meltdown: "The size of the problem is actually bigger than in the 1930s" $ 2010 Soros revealed as one of the largest shareholders in Britain's biggest regional airline, Flybe, which completed a £66m fundraising $ 2011 Soros closes Quantum fund to outside investors $

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