Hedge Fund Market Wizards

Chapter 10

Martin Taylor

The Tsar Has No Clothes

Most hedge fund managers seek to grow assets under management. Martin Taylor chose the reverse course. Ten years after launching his hedge fund with $20 million in seed capital and seeing his firm’s assets under management balloon to over $7 billion, Taylor notified his investors that he was closing his fund in 12 months’ time.1 He made this announcement at a time when his hedge fund’s net asset value (NAV) was within a hair of its all-time high and after having achieved a track record characterized by consistent outperformance. Taylor had decided that other considerations mattered more than maximizing earnings. He coordinated the closing of his original fund with the opening of a new fund that capped assets at less than one-quarter of the previous fund’s size. A hedge manager voluntarily cutting his assets by more than 75 percent is a rarity, if not a singular event.

Martin Taylor may well have the best performance record in emerging markets. Between 1995 and early 2000, Taylor managed a long-only fund focused on East European equities. Then after a five-month hiatus, he launched a hedge fund, Nevsky Fund, in October 2000. Taylor named his fund after Alexander Nevsky, a thirteenth-century Russian hero who defended his country against outside invaders, and thus was not an objectionable figure to neighboring East European countries. Initially, the hedge fund continued to focus on East European equities, but by 2003, the investment ...