Born in 1954, Tudor Jones graduated from the University of Virginia in 1976. He then took a clerical job on the New York Mercantile Exchange floor, before becoming a broker for E.F. Hutton. In 1980 he was accepted by Harvard Business School, but decided to pull out at the last minute in favour of running his own investment firm, Tudor Investment Corporation. This firm, which he still runs, became the umbrella for several funds, covering a wide range of assets.
What was his strategy?
Tudor Jones mainly used technical analysis, including moving averages, to make short-term trades in stocks, bonds, currencies and commodities. While most chartists aim to make money from following a trend, his idea was to find moments where the market was turning. A central part of his strategy was money management: he would scale down losing positions to make sure that one bad bet didn’t blow a hole in his fund.
Did it work?
Tudor Jones’s main fund has returned just under 20% per year during the past three decades. Tudor Investments currently manages around $13bn of assets, though this number is extremely volatile with a number of investors pulling their money from the fund in the past year. This success has made Tudor Jones very rich, with Forbes magazine putting his net worth at around $4.7bn.
What was his best trade?
Tudor Jones is best known for predicting the 1987 stockmarket crash in a documentary aired the year before. His prediction was derived from Elliott Wave theory, a branch of technical analysis that argues that the stockmarket moves in waves, so a rise will be followed by a fall, before another rise (and vice versa). Not only did he make a large amount of money from the collapse but he closed his short position before the market rallied strongly. Overall, his fund returned 200% that year.
What lessons does he have for investors?
Technical analysis is controversial, but Tudor Jones’ success shows it can be used to produce consistent returns over an extended period. But swing trading does require constant attention and discipline, especially with regards to managing the size of each position, and so may not be suited for the average investor. Keeping your emotions under control is also important, and Tudor Jones has said he puts a lot of effort into ensuring stress doesn’t affect his investment decisions.