Bruce Kovner: The world’s greatest investors

Bruce Kovner achieved success by using a mixture of fundamental and technical investment analysis.

Bruce Kovner produced consistent returns of around 80% a year

Copyright (c) 2014 Rex Features. No use without permission.

Kovner was born in New York in 1945. He did his first degree at Harvard, followed by postgraduate study at the university's school of government, but did not finish his PhD, instead working as a writer and commodity trader. Kovner made his first trade at 31, using cash from a credit card, turning $3,000 into $22,000. That year he joined pioneering hedge fund Commodities Corporation as an assistant. Later he set up Caxton Associates, which he ran until 2008.

What was his strategy?

Kovner used a mixture of fundamental and technical information, arguing that technical analysis could reveal information available only to insiders. He would hire researchers to help him find and analyse large amounts of data to spot relationships between various variables, such as interest rates and the price of gold.

Did this work?

At Commodities Corporation, Kovner produced consistent returns of around 80% a year. This inspired him to set up Caxton Associates, which returned around 14% a year between 1983 and 2013, compared with 9.5% for the stockmarket, and with much less volatility. Caxton has assets of around $10bn under management, while Kovner has a net worth of around $5.3bn, according to Forbes.

What was his best investment?

One trade that illustrates Kovner's strategy was his discovery of mispricing in the markets for currency futures derivatives that allow you to hedge against moves in exchange rates. Kovner worked out that the market usually overestimated the extent to which currencies would fall, because a lower forward price increased the likelihood of a rate rise.

Advertisement - Article continues below

Rate rises usually boost a currency, and so currencies would end up falling by less than the futures market anticipated. Kovner made a lot of money in the 1980s buying currencies in the futures market that were predicted to fall and holding them to maturity.

What can we learn from Kovner?

Kovner's late success shows that investing is not just a young person's game; it also shows that combining technical and fundamental factors can work well. Kovner argued that a trader who ignored technical factors was "like a doctor who says he's not going to take a patient's temperature". Colleagues said he had a strong capacity to take large risks while holding his nerve.



Investment strategy

How the fear of death affects our investment processes

Many of our investment decisions are driven by one simple fact: the knowledge that, one day, we will be dead. Here, in an extract from his new book, J…
2 Jan 2020

The good investments of the 2010s – and the bad

John Stepek takes a look back on which investments did well and which did badly in the decade that’s about to come to an end.
26 Dec 2019

Latest issue

Latest issue of MoneyWeek magazine
4 Jun 2020
Buy to let

The death of buy-to-let property is a useful cautionary tale for all investors

Investing in buy-to-let property was once a perfectly valid thing to do. But the government killed the market. John Stepek explains what investors sho…
29 May 2020

Most Popular


These seven charts show exactly why you must own gold today

Covid-19 is accelerating many trends that were already in existence. The rising gold price is one such trend. These seven charts, says Dominic Frisby,…
3 Jun 2020

Disease, rioting and mass unemployment – so why are markets soaring?

Despite some pretty strong headwinds in the last year, America’s S&P 500 stock index is close to all-time highs. John Stepek explains why markets seem…
4 Jun 2020
EU Economy

Why a stronger euro is good news for investors

The fragile state of the eurozone has for a long time brought the threat of deflation. But the ECB’s latest moves have dampened those fears. John Step…
5 Jun 2020