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The world’s greatest investors: Stanley Druckenmiller
Stanley Druckenmiller and George Soros were behind one of the most famous trades of all time: shorting the pound in 1992.
Stanley Druckenmiller adopted a "top down" global-macro investment strategy
Stanley Druckenmiller was born to a middle-class family in Pittsburgh, Pennsylvania, in 1953. He graduated from Bowdoin College with a degree in English and economics and went on to begin a PhD at the University of Michigan, but dropped out in 1977 to work at Pittsburgh National Bank. He became head of equity research at the bank after one year. Druckenmiller founded his own firm, Duquesne Capital Management, in 1981, and was headhunted by hedge-fund giant George Soros to work at Quantum Funds in 1988.
What was his strategy?
Druckenmiller adopted a "top down" global-macro investment strategy, similar to Soros, which means that he sought to profit from broad economic trends by trading stocks, bonds currencies and commodities around the world. He attributes part of his success to the technical analysis (chart-reading) approaches that he learned while at Pittsburgh National Bank.
Did it work?
Yes. Druckenmiller is considered to have one of the best trading records in the industry, having produced average annualreturns of 30% from 1986 to 2010. At the peak of his career, he looked after more than $12bn in assets under management in his hedge fund alone. Druckenmiller left Soros in 2000 after suffering large losses in technology stocks, but carried on working full-time on Duquesne Capital. In 2010, he closed the hedge fund, telling Bloomberg News that he'd been worn down by the stress of maintain his trading record.
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Druckenmiller and Soros were behind one of the most famous trades of all time: shorting the pound in 1992, at a time when the UK was trying to remain in the European Exchange Rate Mechanism (ERM) and keep sterling's value steady against other European currencies. They made $1.5bn in profits when the UK was forced to withdraw from the ERM and the pound plummeted. While the trade is closely associated with Soros, Druckenmiller was the one who spotted the opportunity.
Druckenmiller's motto is "it takes courage to be a pig", according to Bloomberg. He followed a lesson driven home by Soros: "When you're sure you're right, no trade is too big. And the bigger your gains in a year, the more aggressive you can be." Druckenmiller believes that trading success is often down to intuition and views investing as "one big game". You need to be "decisive, open-minded, flexible and competitive".
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