Druckenmiller typically achieved annual rates of return on investment of in excess of 30% percent per annum but after nearly 30 years trading, he decided to retire and shut down Duquesne Capital Management. He had run the firm since the early1980s which at the time had over over 12 billion in assets – the reason?
Was because he felt "dissatisfied" with his performance, this was despite the fact the fund had never given investors an annual loss. He is seen by many as one the best Forex traders of all time and one of the most successful Hedge fund managers but as he put it when retiring “ 30 years is enough”
Hitting Home Runs and Creating for Superior Returns
Druckenmiller built his reputation on knowing when to bet big, when he saw the right opportunity and is similar to legendary traders Bruce Kovner and George Soros in this respect – both of whom, we have looked at in terms of their trading strategies on this site. Below there are two quotes which sum up two key beliefs which enabled him to make such great returns for his funds:
“It is not whether you are right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong” AND “ The way to build superior returns is through capital preservation and home runs”
Obviously he was good at money management but George Soros taught him, the value of home runs which is when you have a conviction on a trade and you have been doing well – hit the trade hard and get your return up.
If you had a return of 30 - 40% per annum return as a fund manager, this would normally be the signal, to take the foot of the gas but this was the signal in Druckenmiller's view to try and hit a high odds trade and milk a home run. He had been taught this by Soros, who once dismissed his 1 billion position as:
“You call that a position?”
He responded and doubled the trading position and ran it and made a huge profit. The lesson was - if you have a strong conviction about a trade, you go for it and while it does take courage to do this but it can make huge gains; being a greedy pig when the set up is right is great animal to be!:
Being a Pig and Winning Big
“It takes courage to be a pig,”
Druckenmiller’s was famous for saying and he has a yellow porcelain pig called Jerome which sits on his desk and being a pig and knowing when to be greedy and gorge himself on a trade are what makes him one of the true great currency traders.
After retiring, with an estimated fortune of nearly 3 billion dollars, he is very active in giving back to the community and is one of America's most generous philanthropists. Final quote which I really like is this one - on games and trading:
“I’ve always loved to play games, and face it, investing is one big game ...You need to be decisive, open- minded, flexible and competitive.”
There great concluding comments but what I like about the trading strategy is – when the odds are in your favour, you have a profit and the conviction about a trade – be a pig and go for it and to create superior returns.