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Thursday, December 12, 2013

Can Mutual Funds Invest Like George Soros?

NEW YORK (TheStreet) -- George Soros and other star hedge fund managers famously made fortunes by betting on global trends. Global macro funds can range widely, holding foreign currencies one year and U.S. stocks the next. But the macro strategy is hard to execute, and not many managers have succeeded. Most mutual funds that have tried the macro game have failed and shut their doors. For mutual funds, the strategy is particularly difficult because managers cannot use the leverage that hedge funds employ.

Now two Wall Street veterans are trying their hands with macro mutual funds, and both managers are off to strong starts. Richard Bernstein, former investment strategist of Merrill Lynch, operates Eaton Vance Richard Bernstein All Asset Strategy EARAX. Brian Singer, former chief investment officer of UBS Americas, oversees William Blair Macro Allocation (WMCNX).

In recent months, Bernstein and Singer both made a series of on-target calls. Bernstein recorded big gains with small-cap U.S. stocks, while Singer scored with Japanese equities. During the past year, Bernstein's fund returned 11.5%, outdoing 90% of its peers in Morningstar's conservative allocation category. The William Blair fund returned 13.7%, topping 97% of competitors in the multialternative category. These days the two funds are following very different approaches. Bernstein is pounding the table for U.S. stocks, while Singer is emphasizing unloved European issues.
George Soros
George Soros
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George Soros was born in Budapest, Hungary, in 1930. His father was taken prisoner during World War I and eventually fled from captivity in Russia to reunite with his family in Budapest. Soros was thirteen years old when Hitler's Wehrmacht seized Hungary and began deporting the country's Jews to extermination camps. In 1946, as the Soviet Union was taking control of the country, Soros attended a conference in the West and defected. He emigrated in 1947 to England, supported himself by working as a railroad porter and a restaurant waiter, graduated in 1952 from the London School of Economics, and obtained an entry-level position with an investment bank.

In 1956, Soros immigrated to the United States, working as a trader and analyst until 1963. During that time, he developed his own theory of markets called 'reflexivity', which he has laid out in his recent books THE ALCHEMY OF FINANCE and THE CREDIT CRISIS OF 2008 AND WHAT IT MEANS. In 1967 he helped establish an offshore investment fund; and in 1973 he set up a private investment firm that eventually evolved into the Quantum Fund, one of the first hedge funds, through which he accumulated a vast fortune.