Last Updated on 7 September, 2021 by Samuelsson
Michael Steinhardt is an American investor, philanthropist, and hedge fund manager. He founded the hedge fund, Steinhardt Partners in 1967. The hedge fund made an average annualized return of 24.5% for its client.
He graduated with a BS at the Wharton School, the University of Pennsylvania, in 1960. His early days in finance started at Calvin Bullock (a mutual fund firm) and Loeb, Rhoades & Co. (a brokerage firm, which was precursor to Shearson Loeb Rhoades).
His father became his first client, giving Steinhardt envelopes filled with dollar bills to buy stock; this was the beginning of his investment career.
In 1967, he used the earnings he made from investing and found Steinhardt, Fine, and Berkowitz (later Steinhardt Partners) alongside co-investor William Salomon, the former managing partner at Salomon Brothers, and Jack Nash (founder of Odyssey Partners).
Steinhardt Partners made an annualized return of 24.5% for its investors, charging them a 1% management fee and a 15% performance fee (later 20%) of all annualized returns realized and unrealized almost more than the annual performance return of the S&P 500 Index over the same period. The Securities and Exchange Commission investigated decades after successfully managing the client’s funds, his firm for allegedly trying to manipulate the treasury note market (short term) in the early ’90s, paying 75% of a total fine of $70million as cconsequences
During the bond market crises of ’94, Steinhardt Partners lost 1/3 of its value. And in 1995, Michael closes the hedge fund, stating, “I thought there must be something more virtuous, more ennobling to do with one’s life than make rich people richer”. Years later, Michael came back into the financial industry, in 2004, as head of WisdomTree Investments, a hedge fund with almost $64 billion assets under management.
In a Bloomberg article posted in 2014, he was referred to as “Wall Street’s greatest trader.” Michael is worth about $1.1 billion as of October 2018 by Forbes Magazine.
After decades of successfully managing the fund, Steinhardt and his firm were investigated in the early 1990s for allegedly trying to manipulate the short-term Treasury Note market after they made about $600 million on the short-term Treasury note positions. He personally paid 75% of a total fine of $70 million as part of settlement with the U.S. Securities and Exchange Commission and Department of Justice. He, however, stated in his book, “No Bull” that he did nothing wrong but paid the settlement fee to put the matter behind him.
After that unfortunate event with the SEC, Steinhardt Partners had an outstanding 1995, recording a new high performance. Steinhardt Partners was closed in 1995, with all limited partners receiving their share of the money.
Michael came back from retirement in 2004 to work for Index Development Partners, Inc. (now WisdomTree Investments). Michael is the Chairman of WisdomTree, offering dividends and earnings-based index funds.
WisdomTree has about $41.2 billion assets under management as of July 2018. The funds saw a slow growth during the fall of 2007 and 2008, as the financial sector where most WisdomTree dividends-based funds are concentrated dipped as did its stock. However, the fund was back in growth as its annualized return usually outperform the market.
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