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Naval commando makes it to world's top 10 fund managers list

Andreas Halvorsen, Viking Global Investors, USA

imgbd In 2015, Andreas Halvorsen was rated 9th best hedge fund manager in the world by Institutional Investors Alpha. He oversees a US$ 27 billion equity portfolio at Viking Global Investors, a firm he founded in 1999 that is very active in the long-short equity space. His training as a naval commando brought in the key skills of integrity and discipline. His MBA from Stanford taught him how to use his math skills in the world of finance. And that, he believes is really the secret of his success: skill with numbers and an unflinching commitment to integrity and discipline. With an estimated personal net worth of over US$ 2.2 Bn, he sure has put his core skills to excellent use!

Starting out

Halvorsen was born in Norway and completed his military training as a naval commando. He then moved to the United States where he completed his degree from Williamson College. He went on to Stanford for an MBA in 1990. He first worked in Morgan Stanley as an investment banker. He then moved on to Tiger Management Corp, founded by Julian Robertson. Here Halvorsen came into his own, rising quickly to become the Senior Managing Director. Having tasted success and tempered by solid experience, Halvorsen struck out on his own after Tiger Corp ceased business. He started Viking Global Investors L.P. in 1999 and assumed the position of CEO and Risk Manager. Viking Global Investors has consistently returned 22% over more than a decade - a sterling performance by any measure.

Investment Philosophy

Halvorsen believes in deep analysis and prudent valuation. He believes that practising this precept over a period of time would produce an array of stocks, both shorts and longs, whose prices would diverge sufficiently from each other to give a remunerative spread. He is a votary of quantitative analysis. Halvorsen is a conviction investor. He likes to take big positions, based on his research, in shares of specific companies which he feels will do well. Halvorsen is very particular about integrity. His conviction in this regard has won the confidence of investors who feel that he would do his very best for them. Similarly his employees also hold him in high esteem knowing that they would get a fair deal, encouraging them to take calculated risks in their investing.

Investment Strategy

Andreas Halvorsen carefully vets the companies he looks to invest in. He does a lot of background checks and tries to 'read' the mind of the company's management. Typically, he begins by talking to suppliers and to the competitors of the companies he is interested in. He then talks to the management to gain an idea of the underlying business dynamics. He then chooses a company which has a vision similar to his own.

He is particular about building excellent management teams. Such teams develop an ability to obtain market share even in periods of low growth. According to Halvorsen the opposite holds equally true. Bad management teams can destroy value very quickly.

Halvorsen notes that his greatest alpha generation has been in his highest conviction ideas. Of 921 long and short investments made by Viking over a five-year period - from 2006 to 2011 - 59% were profitable. Of the 56 investments that resulted in a profit or a loss exceeding 100 basis points, 75% were profitable. The top ten longs returned 28% per annum, outperforming the remaining longs by over 12 percentage points per annum on an unlevered basis. Over the same period, the MSCI World and S&P 500 indices returned 1.5% and 0.4%, respectively, per annum. During 2014, Viking's top 20 longs appreciated by 26.5%. (

At the end of 2014 across Viking's funds, the ten largest holdings comprised nearly 40% of capital. The largest position, Illumina accounted for 5% of this. Gross exposure was 153%, and net exposure came in at 40%. Average gross and net exposures for the year were 173% and 48%, respectively. (

The Company

Just as Robertson was closing his company Tiger Management, Halvorsen got together with two ex Tiger Management executives, Brian Olson, a media and technology expert and David Ott, who specialises in the consumer sector. The company was a success from the beginning, notching up a stupendous 89% increase in the year 2000. This performance helped to attract more than $2 billion in investor funds. According to Jack McDonald, professor of finance at Stanford University, "Halvorsen was one of our brightest students ever."

Viking's Global Equities grew 23% in 2013, while its Viking Long fund jumped 38.4%. The company manages 62 stocks with a total portfolio value of $ 22.9 billion. The fund has been exceptionally successful, returning a handsome 22% annually since it was started, though occasionally the yield has sunk to minus 15%. The company concentrates on the technology, services, basic materials and health care industries.

Early on Halvorsen decided that continuing with an existing and successful idea was good. Thus Viking's strategy is similar to that of Tiger Management. It continues with the same focus on fundamental factors to decide which stocks to buy. It also encourages youngsters to develop into industry specialists, playing a key role in choosing the stocks to buy. Viking puts 40% more of its funds on the long side compared to the short side. This ratio is flexible and changes in accordance with market dynamics. "Given our strong belief in the integrity of our investment selection process, we do not second-guess the resulting net exposure based on top-down analysis," Halvorsen wrote in a January 9, 2009 letter to investors. (Reuters March 1, 2010)


He is quite forthright about short selling. "It's a heart wrenching activity, because you can lose a lot of money doing it." He says you can't short a bunch of underperforming stocks because the risk is too high if you're wrong. And when you are wrong, "you have to get out very quickly, which means you can't have very large positions." ( February 25, 2013) He stresses patience as a virtue for successful investing. One should have patience in any business to succeed and hedge funds are not any different.

Halvorsen is of the opinion that investors should focus more on the returns they get after paying fees, rather than on the actual fees hedge funds charge.

"We think that the secular shift of advertising dollars from traditional media to search and YouTube will drive substantial revenue growth going forward. Since cost growth is decelerating as a result of less aggressive hiring, we expect margins to expand," Halvorsen said.

Integrity, discipline and plain horse sense has made Andreas Halvorsen one of the most successful 'Tiger cubs' in the world. Today Halvorsen's net worth is estimated at $2.2 billion. This has been quite a journey for Halvorsen, from Norway to America, from a military background to that a successful hedge fund manager.


Content is prepared by Wealth Forum and should not be construed as an opinion of HDFC Mutual Fund.

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