Hedge Fund Billionaire Leads Trustees
Published in print on October 31, 2010
By Rick Jurgens, Special to the Valley News
Investing prowess made Stephen F. Mandel Jr. a billionaire. And that success, along with his willingness to use his expertise to help his alma mater, paved the way for Mandel to become a leader at Dartmouth College, where he joined the Board of Trustees in 2007 and became its chairman in June of this year.
Mandel's personal fortune was built, in part, with help from Dartmouth's multibillion-dollar endowment. Lone Pine Capital, the $16 billion family of hedge funds that he founded in 1997, manages investments from Dartmouth as well as, according to Mandel, "many, many, many (other) college endowments."
Running a hedge fund can be lucrative work -- to say the least. In 2009, according to AR magazine, a hedge fund trade publication, Mandel's total personal gain from hedge fund fees and the appreciation of his personal stake in Lone Pine was $300 million. Mandel declined to comment on estimates of his personal wealth and income.
While impressive, that $300 million did not earn Mandel a rank among the top 25 hedge fund managers. (David Tepper of Appaloosa Management topped the list with $4 billion, edging out runner-up George Soros by $700 million.) Nor did Mandel's 2009 income match his more memorable 2007, when Alpha magazine (AR's predecessor) ranked Mandel eighth among individual hedge fund operators with a personal take of $710 million.
Mandel has amassed a personal fortune of $1.6 billion, according to Forbes magazine, which ranked him 252nd on its 2010 list of the 400 richest Americans. (Three others on Dartmouth's 22-member Board of Trustees are on that list, including Texas natural gas baron and former bankruptcy attorney Trevor Rees-Jones and buyout fund manager Leon Black, each with estimated fortunes of $3 billion, and Steven Roth, chief executive of Vornado Realty, with an estimated net worth of $1.1 billion.)
Mandel's journey from Dartmouth undergrad to billionaire stock picker began with his 1978 graduation with a degree in government. Four years later, he got a master's in business administration from Harvard Business School as part of a class that included two other current Dartmouth trustees -- General Electric Chief Executive Jeffrey Immelt and JPMorgan Chase Chief Executive Jamie Dimon. Both are good friends, Mandel said.
In 1984, Mandel joined Goldman Sachs as an analyst of retail company stocks. Six years later, hedge fund pioneer Julian Robertson hired Mandel as a stock analyst for Tiger Management Co., which was then the world's second-largest hedge fund.
Robertson remembers Mandel as "very young, and very, very good," both "utterly thorough" and "a good team player."
In 1997, Mandel left Tiger to launch Lone Pine, where he followed an investing path forged by Robertson, aiming to outperform market indices through deft stock choices and well-timed bets on price declines in shares viewed as overpriced. Mandel described his approach as "bottom-up" analysis of the fundamentals underlying the value of individual stocks.
In its first decade, Lone Pine posted an eye-popping 36 percent annual compound return, according to Alpha magazine, which described Mandel as "one of the hedge fund industry's sharpest stock pickers." Mandel declined to discuss details about his fund's performance with the Valley News, noting in an e-mail that results are "shared with our partners only."
Among Lone Pine's early partners was Dartmouth. Its stake in a fund called Lone Cedar posted an annual return of 22.6 percent over the full decade that ended June 30, 2009, according to information reviewed by the Valley News. Soh Won Cha, a college spokeswoman, characterized the Lone Pine funds as "strong long-term performers" but declined further comment.
Dartmouth's Form 990 federal tax filing for the fiscal year that ended June 30, 2009, records a $36 million investment by the college in hedge funds run by Mandel, including a $10 million "capital contribution" to Lone Dragon Pine LP and $26 million to Lone Sierra LP.
The stake in Lone Dragon Pine "was a new investment reflecting a decision by the College to invest $10 million in that fund," Mandel said in an e-mail. The $26 million put into Lone Sierra "was not a new investment in Lone Pine, but a transfer of funds from profits on investments in other Lone Pine Funds that the College had previously made," he added.
The fiscal year when Dartmouth invested more cash in Lone Pine overlapped the 2008 calendar year, which included an industry slump that TheStreet.com financial website described as "hedge fund hell."
At Lone Pine, assets under management at the end of 2008 fell 28 percent, to $13 billion, down from $18 billion a year earlier, according to Institutional Investor magazine.
Asked about the magazine's estimate, Mandel said: "That wasn't too far off." He added that he believed the assets under Lone Pine's management had "bottomed at $14 billion." Mandel's personal fortune took a $550 million hit that year, according to Alpha magazine. Mandel declined to comment on that estimate.
The value of Dartmouth's stakes in four Lone Pine funds plummeted during the disastrous 2008-09 fiscal year, according to information reviewed by the Valley News. The biggest holding, in Lone Sierra, fell 25.8 percent, to $55 million, while Lone Dragon Pine fell 28.5 percent, to $6.5 million. The value of its Lone Pinon holding was down 18.2 percent, to $17.8 million, while its Lone Cedar stake fell 19.8 percent, to $30.9 million. During that same 12-month period, the S&P 500 index of stock prices fell 28.2 percent.
Robertson, Mandel's former mentor, dismissed Mandel's 2008 as "one bad year." Robertson said he has invested in Lone Pine funds and considers Mandel "one of the most respected people in the business." In Mandel, Robertson said, "You have a guy that really is as good as he is cracked up to be."
Indeed, the value of Dartmouth's four Lone Pine holdings later rebounded, from about $110 million in June 2009 to $121 million at the end of September 2009 and $124 million by the end of November, according to the nonpublic information reviewed.
Even an alumnus critical of the endowment's management had some kind words for Mandel. Joe LaVigna, a retired investment banker who graduated in 1959, wrote in an e-mail to other alumni that in several exchanges he found Mandel "courteous, generous with his time and ... mostly open, not at all defensive but highly confident and unapologetic."
Meanwhile, Mandel has opened his wallet to support various nonprofit organizations.
He is a board member at Teach for America. He is chairman of, and in 2008 contributed $5 million to, the Lone Pine Foundation, which handed out $4.8 million to schools, charities and other nonprofits and that owned Lone Pine partnership stakes valued at $11.7 million. During the fiscal year that ended June 30, 2009, Mandel and his wife also gave $40 million to the Zoom Foundation, a private foundation where they are the sole trustees. Zoom owned Lone Pine partnership stakes valued at $292 million but did not disclose details of its $9 million in giving.
Prior to becoming a Dartmouth trustee, Mandel was a trustee and investment committee chairman at Phillips Exeter Academy, a prep school in Exeter, N.H., with its own billion-dollar endowment. Mandel graduated from Phillips Exeter in 1974.
At Dartmouth, Mandel co-chaired the successful Campaign for the Dartmouth Experience, which raised $1.3 billion. His father, who died in September 2009, was a member of the class of 1952 and also a prominent fundraiser for the college.