A new Legend: Robert Citrone

We are excited to announce the inclusion of a new Legend into our portfolio. Robert Citrone was the head of global emerging market investments at famed hedge fund Tiger Management, before founding Discovery Capital Management in 1999. He is one of the world’s most recognized macro managers. We have had money with Mr. Citrone for years and he meets all our criteria for being a Legend: a sustainable edge, adaptiveness and alignment. Above all, he is a tremendous money maker.

We initiated a position per November 1st and expect the fund to be an important driver of returns for the Legends Fund going forward. Robert Citrone is one of the most versatile investors around. He is truly agnostic between being long and short, covers all liquid asset classes and does it on a global scale with a preference for emerging markets. Central to the firm’s investment process is local, in-country due diligence. What enables him to do this is the tremendous organization he has built and his unmatched network of advisors that was built over the last 20+ years, which we believe represents significant enterprise value. Amongst the people he has attracted money from are legendary investors George Soros and Mr. Citrone’s former boss Julian Robertson. Over more than fifteen years the Discovery Global Opportunity has achieved net annual returns of 14%.

Citrone’s Discovery Global Opportunity Fund is covering an area which we feel is underrepresented in the Legends Fund portfolio: emerging markets global macro. It’s an area that provides attractive opportunities away from the QE influenced developed markets. It is also an area followed by fewer investors, resulting in more inefficiencies. We think the timing is right as Discovery has become significantly smaller due to outflows on the back of two years of unexciting performance and is now at a much better size to play this opportunity than when it was at peak assets. We like to be a bit contrarian in that sense, building positions when strategies are temporarily out of favor. Such times often prove to be the best times to invest.
Discovery Capital employs 83 people, 40 in the investment team and 43 in the infrastructure team. The firm has a 24/7 trading desk and Citrone has a regular 3 a.m. call so he can be briefed on the opening of European markets and the close in Asia. The firm is notorious for its local due diligence and investment team members spend around 25% of their time on research-related travel. The fund currently has investments in more than 50 countries world wide.

Another aspect that makes the fund somewhat unique is its dual approach: the macro view helps to inform the bottom-up views and vice versa. Conviction levels are highest when top down and bottom up analyses corroborate each other. At Tiger Mr. Citrone was behind the fund’s shorting of the Thai Baht just before the Asian crisis. We think this experience will serve him well as we foresee large moves in currencies and maybe at some point a sharp devaluation of the Chinese Yuan.

The grandson of a coal miner and a son of a sales executive at Diebold, the maker of safes, Mr. Citrone studied math and economics at Hampden-Sydney College in Virginia, where his senior thesis focused on Latin American debt. He graduated from business school at the Darden School at the University of Virginia and was hired as a corporate-bond analyst at Fidelity Investments in 1990. Today, Citrone owns a part of the Pittsburgh Steelers Football team and he is joined in the owner’s box by fellow hedge fund mnager David Tepper of legendary hedge fund Appaloosa.

Over 10% of the assets are Citrone’s invested in the fund himself, resulting in the alignment we look for in managers.