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George Soros biography: What is his investment style?

4 min. reading
George Soros / 10 July, 2021

Edgar Mondragón Tenorio Journalist

“It doesn’t matter at all whether you are right or wrong. What does matter is how much money you make when you are right and how much you lose when you are wrong.”

George Soros

From East to West

George Soros is a name that undoubtedly resonates in every part of the world. His fame transcends from Southeast Asia to North America, and he is cited, both in financial literature as a great strategist, as well as in the more eccentric conspiracy theories.

Survivors of the Nazi occupation in his native Hungary, and the anti-Semitism that prevailed even after the war, Soros and his family managed to flee to Switzerland in 1946, and he would later emigrate to England a year later to study at the prestigious London School of Economics, where he would study economics and philosophy.

Graduating in 1952, Soros held various small jobs, from waiter to souvenir seller. In 1954, the first opportunity to enter the financial world presented itself when he started working at Singer & Friedlander Bank. Soros started as a low-profile employee but worked his way up to the arbitrage department.

Soros’ talent did not go unnoticed and, on the recommendation of a co-worker, he applied to join the F.M. Mayer firm in the United States, which was successful, and he made the big jump to New York in 1956.

His time on Wall Street

Once settled in his new job at F.M. Mayer, Soros quickly advanced in the same line he knew, arbitrage, but also began to specialize in European stocks involved in the creation of the Coal and Steel Community, in view of the old continent’s booming economic recovery.

Three years later, Soros would move again to Wertheim & Co. where he would remain as an analyst of European stocks, but also spend time developing his Theory of Market Reflexivity to explain the reasons behind the abrupt price fluctuations in the stock market.

In 1963, the firm Arnhold and S. Bleichroeder hired Soros as vice-president, although just at a time when new tax laws made it unfeasible to continue with the European stock business.

But even in this scenario, he demonstrated his ability and fortitude to the extent that, in 1966, this firm entrusted him with $100,000 to start a fund where he could freely experiment with his strategies.

Quantum and “Black Tuesday”

Soros’ hedge fund, Double Eagle, started with an initial capital of $4,000,000, but was still part of the Arnhold and S. Bleichroeder firm.

The difference was that this time, Soros and his partner, Jim Rogers, had a stake of their own capital, from which they collected both their returns and a percentage of the fund’s overall profits each year.

The profits from this participation were enough for Soros to establish his own management company, Soros Fund Management, in 1970, whose first hedge fund, Quantum Fund, would become the tool with which he would go down in history a couple of decades later.

In 1992, faced with an unfavorable scenario for the United Kingdom regarding its incorporation into the European Exchange Rate Mechanism, precisely, with a high exchange rate against the German mark and the imminent change in German rates, Soros decided to buy short positions against the pound sterling.

From the night of September 15 to the morning of Wednesday, September 16 of the same year, through his Quantum fund, he sold $10 billion dollars in sterling, causing the worst devaluation in British history. With this move, Soros made a profit of close to one billion dollars in a single day.

The figure of Soros

Although he was not the only speculator to bet against the pound sterling on that “Black Wednesday”, he was the most notable, both in terms of the profits obtained and Soros’ own fame.

In fact, while the sterling debacle was occurring, he was in Europe, advocating for the liberation of the Eastern countries from the then Soviet Union, an issue in which he was heavily involved because of his Hungarian roots.

In addition, he is also known for his active philanthropy, in total, he has donated almost half of his fortune, valued at $25 billion dollars, to various social causes, such as funding scholarships at many universities around the world. He has also voiced and financially supported controversial issues such as “the right to die”.

The name of George Soros is already an emblem and legend in the world of finance, and like any iconic character he has followers and detractors. Regarding “Black Wednesday”, there are those who call him dastardly and ambitious, and there are those who say that he only took the opportunity he saw.

Whatever the impression that the figure of George Soros provokes in each person, he is undoubtedly already a landmark of Wall Street and the financial world in general.

 

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