A Cautionary Tale

The rise and fall of Gary Tanaka - at www.moneyweek.com - the best of the international financial media

Unlike his business partner Alberto Vilar, US fund manager Gary Tanaka has always maintained a low profile. He moved to Britain some ten years ago and for a long time lived a quiet life in Kingston-upon-Thames, travelling daily to Mayfair to oversee the European arm of the acclaimed tech fund Amerindo Investments. His unwillingness to stray into the public eye was so pronounced that when he donated £27m to Imperial College London to fund a new business school, the authorities had trouble persuading him to lend his name to the venture. Tanaka's "one indulgence", says the Evening Standard, was racehorses, but this year he was even absent from Royal Ascot. Instead, he was in New York under practical house arrest facing charges of siphoning off millions to fund his thoroughbred habit.

The way to Amerindo

Compared to Vilar, who also faces multiple fraud charges of using clients' funds as "a personal piggy bank", Tanaka has had it relatively cushy. Vilar, who used to boast he could afford to donate $100m a year to his favourite causes (notably opera houses), spent several weeks festering in jail before a $10m bail bond could be raised. All in all, it has been "a spectacular fall from grace" for the duo who ran one of America's "most consistently successful" funds for more than 20 years, says The Independent on Sunday. Tanaka and Vilar first came together in 1979, united by the conviction that the emerging tech market held huge potential. They were both outsiders: Vilar, though born in New Jersey, clung on to his Cuban roots; Tanaka, whose parents were Japanese, spent his early years in a US internment camp. He graduated from MIT in 1965, and headed for Imperial College, London where he is still remembered as a "brilliant student" for a PhD in mathematics. Before teaming up with Vilar, he cut his teeth in finance as a fund manager in San Francisco.

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Glory days

The great advantage in the early years was that few others shared Vilar and Tanaka's enthusiasm for semi-conductor technology; by and large, they had the market to themselves. Their strategy was simple, says Fortune: they would buy shares in promising operations "and hold on until a company either showed signs of faltering or simply got too big".

Early "great calls" included Microsoft and Cisco. By the late 1980s, the pension funds were clamouring for a piece of the action. "When the internet came along, Amerindo didn't hesitate", and added Amazon, eBay and Ariba to its "sizzling" portfolio. By 1999, the fund had become a cause clbre, having chalked up annual gains of 27.9% over the decade, compared with 18.8% for the S&P 500.

Back to his roots?

Vilar and Tanaka always knew there would be a correction, but believed it wouldn't last. "If you want to minimise volatility," argued Vilar, "you're going to miss the greatest financial story ever told." As late as 2001, with the dotcom crash in full swing, he "professed to see it as an opportunity rather than a crisis", predicting an early bounceback, says The Guardian. But he was wrong and the duo have paid a heavy price. Their main fund, worth $10bn at its peak, is now down to a mere $100m, and with the two principals embroiled in fraud investigations, investors are fleeing by the day. Tanaka, 62, has always felt more at home in Britain than America, says The Independent. Bad news, then, that, if convicted, he may end his life as he began it: in America, behind bars