Hero to liberals, Soros ends hedge fund career to escape regulations

July 26, 2011

George Soros, the liberal left’s most prominent billionaire donor and activist, is winding down his career as a hedge-fund manager, marking a major milestone in a financial and philanthropic career that spanned four decades.

Citing new rules that would have required it to submit to more federal oversight, Soros’s management firm said Tuesday that it plans to close its $25.5 billion funds to outside investors and become a family-only enterprise. The move raised eyebrows in financial circles because Soros was an outspoken advocate for reforming Wall Street in the wake of the financial crisis.

The change also enables Soros, who turns 81 next month, to become further involved in various philanthropic and political causes to which he has already devoted more than $7 billion, according to a person familiar with the company, who spoke on the condition of anonymity to discuss the firm’s transition.

To liberals, Soros has towered as a prominent source of financial support from a Wall Street that is often dominated by donors who lean toward conservative causes and candidates.

In 2004, he famously donated $27.5 million to various political groups seeking to prevent President George W. Bush’s reelection. One of the groups, MoveOn.org, has since grown into an even bigger grass-roots organizer for liberal causes and candidates, standing as a counterweight to organizers such as the Conservative Political Action Committee.

And in 2005 Soros bankrolled the Democracy Alliance, which grew into a nationwide network of wealthy donors writing checks to liberal think tanks and advocacy groups.

“He helped to build some of the progressive infrastructure that has, I think, made a significant difference in the debate,” said Robert Borosage, co-director of the Campaign for America’s Future, one of the liberal groups funded by the Democracy Alliance. “But perhaps his most important philanthropy in this area has yet to come.”

Borosage points to Soros’s recent backing of the Institute for New Economic Thinking, a group devoted to promoting liberal economic policies, as a next step in countering the spread of conservative thought in academia.

“George is distinctive in his philanthropy for his understanding of the importance of ideas,” Borosage added.

Ironically, Soros’s backing for the sweeping financial reforms — which was embodied in landmark legislation enacted by Congress last year — helped put an end to his time in the hedge-fund business.

The act requires hedge funds, which manage pools of money on behalf of investors, to register with the Securities and Exchange Commission by early next year.

“An unfortunate consequence of these new circumstances is that we will no longer be able to manage assets for anyone other than a family client as defined under the regulations,” the firm’s deputy chairmen, Jonathan Soros and Robert Soros, wrote in a letter to investors Tuesday.

To comply with the rules, Soros Fund Management will return about $750 million of outside investors money, according to the person familiar with the firm.

A Hungarian-born Holocaust survivor, Soros was a titan in the hedge fund industry, where he made his fame and fortune by taking big and often unconventional bets that earned him billions. In 1992, he made an estimated billion dollars in profit by rightfully betting that the value of the British pound would fall, earning him the nickname, “the man who broke the pound.” He is estimated by Forbes to be worth $14.5 billion, placing him at 46 on the magazine’s 2011 ranking of the world’s billionaires.

But some say Soros will be remembered less for how he made his wealth and more for how he spent it.

“I think his legacy will be in the impact he’s had in his philanthropy,” said Justin van Fleet, an expert on philanthropy at the Brookings Institution’s Center for Universal Education. Of particular note, Van Fleet believes, will be Soros’s promotion of “society-wide reforms that really bring everyone up” in the countries he has given to, such as the promotion of democracy in Eastern Europe through his Open Society Foundations.

Since Soros established the group in 1984 to help countries mark their transition from communism, its activities have grown to more than 70 countries.

Soros chairs the group, based in New York, and remains chairman of his investment firm, Soros Fund Management.

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