SAN FRANCISCO -- The boys who've cried wolf before were howling Wednesday about

Tiger Management


As you've likely heard by now, various (and sundry) media outlets have issued

reports discussing the possible denouement of the once $22 billion hedge fund, whose assets have recently fallen to around $6 billion. Specifically,


reported Tiger will shutter its large offshore

Jaguar Fund

on Friday while


reported the entire shop will be closed.


reported on the high turnover at Tiger in the past but generally eschewed the scuttlebutt about the firm's demise. After one trip down that path, I quickly realized such talk was not provable and seemed to be regurgitated every time there was a hiccup in the market.

Tiger's spokesman declined to comment, so the rumors remain just that at this point. But the discussions among market players took on a level of seriousness and finality previously missing from the story.

"I'm confident there will be an announcement made Friday," said one former Tiger employee who requested anonymity. "I do believe it will be the plan to close Tiger Management. I sense there is something going on, and that was never the sense when I was there when other rumors were occurring."

The timing of the announcement "makes sense," the source said. At the beginning of the year, Tiger executives -- led by founder

Julian Robertson

and chief operating officer Philip Duff -- laid out Sept. 30 as the deadline to "turn this thing around" or the shop would be shuttered, he explained. But additional losses since the beginning of the year -- around 14%, according to various sources -- plus another "large" round of quarterly redemptions made a turnaround by September unlikely.

Another ex-Tiger employee said the fund has spent the past few weeks "liquidating positions in anything they don't have to file" with the

Securities and Exchange Commission


If true, that should minimize the market impact of whatever announcement (if any) Tiger is going to make on Friday. Tiger's pending demise was cited as a factor in the



Wednesday, but the hedge fund is not active in technology stocks. The fund had only 9% of its equity allocation in the sector at the end of 1999, according to

Business Week


Fortunately for the market, but unfortunately for Tiger, the bulk of its holdings are in struggling value stocks such as

US Airways Group

(U) - Get Report


Columbia/HCA Healthcare



Sealed Air

(SEE) - Get Report


Tiger's fall from grace began in the fall of 1998, when a bet on dollar-yen went

horribly awry, costing the fund billions and wiping out what had been double-digit gains for that year. Tiger ended up losing 3.8% in 1998, which proved to be the beginning of the end of a streak that had seen Tiger post average annual returns of 29% beginning in 1980, when Robertson started with a mere $8 million.

The fund lost 19% in 1999 as it suffered additional losses in so-called macro bets -- such as in Russian bonds -- even as it began to focus more of its effort into pure equity investing. Over 90% of Tiger's assets are currently in stocks, according to a source close to the fund.

As part of the effort to become more of an equity shop, the fund reduced its use of leverage in recent months. That protected it from big losses such as the dollar-yen bet in 1998, but also made engineering a comeback from its recent losses even more difficult.

Ex-Tiger employees note the fund has to recoup all the losses from recent years and then generate another 20% in profits before it can reap the management fees that have historically made up the bulk of employee compensation. The steep odds against generating such fees is another factor in the firm's rumored decision to shut down one or more of its funds this week.

The firm's weak performance since late 1998 led to an increasing level of redemptions, sources say, which forced Tiger to sell some of its equity holdings. That, in turn kept pressure on Tiger's stock assets, which were already out of favor with a tech-mad Wall Street.

Faced with that double-edged guillotine, Tiger made a decision not to sell its largest holdings so as to avoid putting additional pressure on its portfolio, one former Tiger employee said. "They thought, 'For performance reasons, we don't want to sell those names'" because word would inevitably get out among other traders, he said, noting Wall Street is a place notoriously bad for keeping secrets.

That strategy had the (we hope) unintended effect of what the source described as "illiquid stocks" becoming a larger percentage of Tiger's portfolio as other holdings were scaled back.

"There's a certain amount of hubris when you take a position so big you have to be right and so big you can't get out when you're wrong," another ex-Tiger said (unwittingly providing a moral to the story). "That was something Julian never would have done when he was younger. That isn't good risk/return analysis."

The source also criticized Robertson for not putting enough emphasis on the "continuity" of staff and said the cumulative effect of the defections was a significant cause of Tiger's woes.

But in the next breath, he expressed tremendous admiration for Robertson, saying, "I can only hope to aspire to the success and ability Julian had, the investment acumen

demonstrated over two decades. I hope I have the opportunity to make the same mistakes at the end of my career."

The irony of all this is that Robertson's demise (perceived or actual) comes at a time when the value approach he helped popularize is showing signs of coming back into style. Perhaps like the South in which he was reared, Robertson will rise again. But if so, any comeback is likely to be a far less spectacular trip than the original.

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