Requiem for a Heavyweight: Round 2

Even as

Lennox Lewis


Michael Grant

prepare for the biggest -- by combined weight --

championship boxing fight ever, the hedge fund world seems to be going the way of the welterweights.


major reorganization at

Soros Fund Management

Friday comes less than a month after

Tiger Management

announced it was shuttering its operations.

George Soros

isn't completely following the lead of fellow hedge fund legend

Julian Robertson

. But developments at Soros' hedge fund group go far beyond the resignations of managers

Stanley Druckenmiller


Nicholas Roditi


Soros said the fund group will significantly reduce its risk exposure and -- in a letter to shareholders -- discussed the perils of running a multibillion portfolio with a macroeconomic, or top down, approach:

"We have come to realize that a large hedge fund like

Quantum Fund

is no longer the best way to manage money," Soros wrote. "Markets have become extremely unstable and historical measures of value and risk no longer apply. Quantum is far too big and its activities too closely watched by the market to be able to operate successfully in this environment."

I was struck by the candor of that statement and was reminded of comments made by Brian Olson of

Viking Capital

when the former Tiger employee left last year to run a smaller hedge fund.

"There's a market for people that do simpler strategies," Olson

said. "Tiger and

George Soros invest in everything. I think people that are going to be successful in a difficult environment are people that stick to one thing."

At the time, it seemed a little like the fund manager was putting on a brave face as he and some fellow Tiger refugees prepared to cut the umbilical cord. Now, those words seem incredibly prescient.

Tiger, you'll recall, was undone by an ill-fated bet in value stocks. At Soros, meanwhile, top holdings included such growth favorites as


(ORCL) - Get Report


Sun Microsystems

(SUNW) - Get Report


Veritas Software

(VRTS) - Get Report



(QCOM) - Get Report






(MSFT) - Get Report

, and



, according to


So you can't say Soros ran aground because he didn't "get tech"-- a charge frequently lobbed at Robertson. In fact, losses earlier this year in the growth sector played a large role in the declining performance of Soros' flagship Quantum; recently, the fund was down nearly 28% year to date -- after rising 35% in 1999 -- as assets shrunk to $8.25 billion in mid-April from $10.4 billion at Dec. 31, according to a



But Soros also sustained heavy losses betting on the euro, which has declined more than 20% vs. the dollar this year. Similarly, Tiger suffered in previous years from ill-fated currency bets in addition to its value stock misery.

The point being, the macro style that served Soros and Robertson so well for so long, is a recipe for trouble in an environment where it's increasingly difficult for even the savviest manager to successfully keep tabs on all the moving parts of an increasingly intertwined global marketplace.

The doesn't mean there's no place left for the macro hedge funds, but the fact is most of the larger hedge funds always have used a bottoms-up approach. That is, they focus on individual stocks or sectors rather than the entire gamut of investment possibilities. As in medicine and countless other areas, the specialist has emerged victorious on Wall Street.

A spokeswoman for

Tudor Investments

, one of the few remaining large U.S-based macro hedge funds, declined to comment.

So what does all this mean for individual investors? There's some

sense the "aggressive liquidating," as one source described it, undertaken by Soros Funds in the past few weeks, contributed to the

Nasdaq Composite's

recent struggles. Yeah or nay, concerns of more selling by the group didn't seem to hamper tech stocks Friday, as the Comp rose another 2.3% while the


declined 1.4%.

Looking ahead, one former Tiger manager mused the diminution of macro players such as Soros and Robertson will result in more of the one constant investors can depend on -- volatility.

Without the liquidity provided by macro players' assets, stocks "can get ridiculously over or undervalued because no one is willing to put up the capital to staunch that excess," he said.

The macro funds' huge investments contributed to their own demise, because exiting such positions proved impossible to do without attracting attention. But they also provided a counterweight -- even if an unintentional one -- to the more fickle players in a given stock. With the "fundamental, long-term macro money" heading to the sidelines, "the momentum guys can drive the stuff all over the place," the source said.

I'm not shedding tears for Soros, Druckenmiller, Robertson or others of their ilk. They had their day. They made their money. Gobs of it.

While colorful, Wall Street may be a more exciting place without them. Many boxing aficionados prefer middle and welterweight bouts because the contestants usually take -- and throw -- a lot more punches than bigger fighters before one succumbs, or the final bell rings.

With Robertson unable to answer the bell for the 15th round and Soros taking the standing eight count, investors off all kinds better be working on their jabs, footwork, and hand speed.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at .