If Tiger Goes, It May Go With Just a Whimper

If the end of Tiger Management and the legend of manager Julian Robertson are indeed upon Wall Street, the giant hedge fund firm seems like it will go quietly into the annals of the stock market.

While the Nasdaq did shed 4% Wednesday as word of Tiger's apparent impending dismantling spread, Robertson had limited exposure to tech stocks. So investors didn't appear to be selling tech because of Tiger.

Instead, Robertson largely stuck to his value investing strategy, pouring money into stocks such as Carnival (CCL), Niagara Mohawk (NMK), Sealed Air (SEE) and US Airways (U).

And those stocks showed little reaction to the news. Carnival was unchanged at 24 5/16; Niagara climbed 7/16 to 13 7/16; Sealed Air slipped just 5/16 to 49 5/8; and US Airways dropped 7/16 to 25 7/16.

"This was one of the biggest hedge funds, and typically, the uncertainty would create more volatility," says Greg Simmons, who manages Linear Capital, a California hedge fund.

Indeed, but Tiger is much smaller than it once was. Since mid-1998, the fund shrank to just more than $6 billion in assets from more than $20 billion, thanks to negative returns and redemptions from investors.

"Given that the fund is smaller than it used to be, we don't really see a market impact, per se," says Barry Colvin, the director of research at hedge fund consultant Tremont Advisors.

Observers also expect that Robertson will use great caution in any exit strategy. "They have fairly large positions in Dell (DELL) and US Airways, and I don't think they're going to blow it all out in one day or one week," Colvin says.

And from filings with the Securities and Exchange Commission, it appears that Tiger already had been reducing its exposure to some stocks.

Of course, it's not certain that Robertson is closing up shop. A Tiger spokesman says investors haven't been notified of any new developments. Even people who were speaking Wednesday about Tiger in the past tense say they've received no confirmation of the liquidation of the entire company or even its main Jaguar Fund.

But after being regarded as one of Wall Street's best investors and producing annual returns of more than 20% for much of the past two decades, Robertson and his firm are now at the center of rumors that have it ready for whitewashed windows and empty desks.

Tiger's fortunes, which were weakening over the past two years, have gotten steadily worse. After falling close to 13% from January through February, the fund may have lost another 10% in March, one pro says.

If the funds were to liquidate, investors, who are rich, most likely would receive whatever percentage of their capital was remaining, as if they were cashing out of a mutual fund. There was little information Wednesday on how the firm would pay investors.

Typically, Colvin says, liquidating hedge funds distribute a large portion -- 80% or 90% -- of the capital to investors in one piece, and then wait until after an official audit to distribute the remaining assets.

Tiger ended up in this situation in part because of a difficult March, when it was hit hard by a merger arbitrage play on the union of Qwest (Q) and US West (USW), say two market pros. A standard position in such a situation would have put Tiger long US West, and short Qwest, a typical arb play that involves betting the stock of the company being acquired will rise while the acquiring company's stock will fall.

But Qwest rose dramatically during the last week of February and first week of March as Deutsche Telekom (DT) considered bidding for the company.

The Tiger spokesman says if the fund did have a position on that deal, it wasn't among its largest holdings.

Yet in the end, it may have simply been the pain of being a staunch value investor that caught up with Robertson.

"When you've done as poorly as they have recently, you're constantly in a liquidation phase," says Bruce Ruehl, Tremont's chief investment strategist. "It's next to impossible to continue to implement a value strategy under those circumstances. They had a very rough January and February.

"These are not bad guys operating on the fringes," he adds. "It was just not his kind of market and it was difficult to adjust."

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