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Nehal Chopra has been sprinting ahead of the pack most of her life.
She became a top-ranked youth tennis player growing up in Mumbai, and received an MBA from the Wharton School at the University of Pennsylvania while most of her peers were getting their bachelor’s degrees. Before she was 30, she persuaded billionaire Julian Robertson to seed her hedge-fund firm Ratan Capital Management LP.
Since 2009, Chopra has trounced her competitors, averaging 19 percent annual gains by betting on companies in upheaval, almost triple the industry average. To the 34-year-old’s supporters, including Robertson, she’s a brilliant stock picker whose aggressive nature has made them millions of dollars.
Chopra has plenty of detractors too. Former employees and prospective investors say her management style has cost New York-based Ratan talent and prevented it from expanding beyond $750 million in assets. Potential clients have passed because of failures to keep employees and concerns that her concentrated bets could lead to losses. Another concern, according to three prospective investors: That she shared investment ideas with her husband, who runs a competing hedge fund.
“She’s a demanding person,” said Robertson, the 82-year-old founder of Tiger Management LLC who gives startup money to hedge-fund managers. “We’re working on that,” he said in a telephone interview, referring to employee departures. “She is still a relatively young person. Some of these people have a lot of things to work into their lives.”
Chopra’s predicament — performance is up, yet investors remain wary — highlights the difficulties of managing money while expanding a business within the hyper-competitive hedge-fund industry, where a few stock picks can make or break performance. Ratan has had four chief financial officers and lost as many analysts in five years, according to one potential investor and two former employees with knowledge of the business, who asked not to be identified because the information is private.
“Senior business people leaving consistently is a red flag, there’s no question,” said Chris Schelling, deputy chief investment officer at the $16 billion Kentucky Retirement Systems, who hasn’t weighed investing with Chopra. “It’s definitely an impediment, especially with institutional capital.”
Similar Strategy
Chopra is married to Paritosh Gupta, who manages money using a similar strategy, a rare phenomenon within the hedge-fund industry. Both seek to capitalize by betting on companies in transition, dealing with management changes or mergers.
His previous employer, Brahman Capital Corp., hired law firm Schulte Roth & Zabel LLP to monitor overlap in the couple’s hedge-fund investments starting in 2011, according to a person familiar with the matter who asked not to be identified because the results were never made public.
Gupta, who left New York-based Brahman last year and started his own fund in January, didn’t return calls. Chopra declined to comment for this story.
“How can you expect a husband and wife team who love each other and are in the stock business not to talk stocks?” Robertson said, adding he was aware of the situation and that Chopra did nothing wrong.
Mandel, Coleman
Chopra is a Tiger seed, a term given to the managers who get startup money from Robertson in exchange for a stake in their businesses. Tiger cubs, who also frequently get money from him, are those that worked for Robertson, including Stephen Mandel of Lone Pine Capital LLC and Chase Coleman of Tiger Global Management LLC.
As the only woman managing money in a community of 30 investors that Robertson has seeded, Chopra isn’t a typical Tiger protege. There are about 125 female-run funds, representing about $100 billion in assets, or 3.6 percent of the total hedge-fund industry, according to a June report by Kyria Capital Management LP, which invests in funds run by women.
Only a handful of spouses have each run separate hedge funds, including billionaire Ken Griffin, founder of Citadel LLC, and Anne Dias Griffin, who used to run Aragon Global Management LLC, an investment firm she started with backing from Robertson that returned money to clients in 2009. The couple is currently divorcing.
Intelligence Exam
Chopra pitched Robertson after meeting him at charity events. The billionaire, who ran the world’s largest hedge fund in the 1990s, was impressed by her academic pedigree and tennis prowess. After growing up in Mumbai, where she attended Fort Convent and Sydenham College, Chopra graduated in 2002 from Wharton, earning a bachelor’s degree in finance and MBA in four years.
After college, Chopra worked for Lehman Brothers Holdings Inc. as an associate and spent two years at investment firm Ramius LLC. In 2007, she went to Chicago-based hedge-fund firm Balyasny Asset Management LP, where she oversaw about $100 million in event-driven investments, according to a person familiar with the matter. She left a year later as stock markets slumped amid the financial crisis.
Robertson said she scored highly on a test given to Tiger seed candidates that aims to measure qualities including intelligence, critical thinking and the ability to fit into a familial setting.
‘Vicious Competitor’
“She is a vicious competitor, she is a winner,” Robertson, who initially gave $25 million to help start Ratan and now has $100 million with her, said in an interview with Bloomberg Television last year. “I found that people that compete well in one thing compete well in other things.”
Chopra started Ratan, which means jewel in Sanskrit, in 2009. The Tiger Ratan Capital Fund has made money every year since. The fund last year gained 47 percent when most managers couldn’t beat the Standard & Poor’s 500 Index, which rose 30 percent.
One of her best trades has been Valeant Pharmaceuticals International Inc. (VRX), which she first told investors about in 2009, when it was trading below $15 a share. She was convinced its new CEO, Mike Pearson, would turn the company around.
Pearson spent at least $19 billion on more than 35 acquisitions in an attempt to turn the company into one of the world’s largest drugmakers. Valeant now trades at $121.43. As of June 30 it was Ratan’s largest holding with a $92.3 million market value. Robertson credits Chopra as being the first manager within the Tiger community to invest in the stock and recommend it to others.
Allergan Offer
Valeant, a big contributor to Ratan’s performance, has slumped 10 percent since April when the company teamed up with Bill Ackman’s Pershing Square Capital Management LP to make a cash and stock offer for Allergan Inc. (AGN) The decrease contributed to a 7 percent loss for Ratan in July and a 0.6 percent decline in August.
The fund is up 1.9 percent this year through August, compared with a 4.1 percent gain for hedge-fund managers on average, according to Chicago-based Hedge Fund Research Inc. It’s still the best-performing among those in Tiger Accelerator Partners, a pool of seven Robertson-seeded funds that was formed in 2011.
Yet some of the other Robertson-backed firms that began around the same time have raised more money. Orlando Muyshondt’s event-driven long-short equity firm Tyrian Investments LP has raised $1 billion, and Tiger Eye Capital LLC, run by Benjamin Smith Gambill, has attracted $1.4 billion.
No CFO
While Robertson said he’s pleased with the pace of Ratan’s growth, he acknowledged that management issues have held it back. The firm had no CFO for the six months ending in April. Chopra prefers to control investment decisions, leaving analysts with minimal input, according to a potential investor and two former employees. Ratan currently employs six people, including Chopra and two analysts.
“We’ve been telling her one of the reasons she didn’t grow faster was because she didn’t have some of these positions filled and she needed to fill them and keep the people,” Robertson said. “I think she’s getting that.”
Four former employees said Chopra’s efforts to keep costs low, such as offering bare-bones insurance plans, made it hard to retain staff. Benefits, which now include medical, dental and vision coverage for staff and their family members, have expanded over time, according to a person with knowledge of the firm.
Vetting Trades
Prospective investors said they remain uneasy that Chopra may have relied to some extent on input from her husband, who is chasing returns in the same arena. Two of Chopra’s former employees, who spoke on condition of anonymity for this article, said they were interviewed by Gupta before being hired by Ratan prior to 2014.
Brahman, which manages more than $3 billion, monitored their investments for more than a year using Schulte Roth. Richard Grossman, general counsel and chief compliance officer at Brahman, and Sun Min, a spokeswoman for Schulte Roth, declined to comment.
Regulatory filings show four of Ratan’s top five holdings – - Valeant, Six Flags Entertainment Corp., Symantec Corp. (SYMC) and Charter Communications Inc. — were held by Brahman in the fourth quarter of 2012, the first time Ratan filed a 13F with the U.S. Securities and Exchange Commission. The number of Ratan’s largest stock picks that were also among Braham’s holdings fell to one out of five by the end of 2013, according to that year’s fourth-quarter filings.
Tiger Considered
Robertson said Tiger also considered monitoring Ratan and Brahman’s investments, and stood down after the latter began its process.
“I think it was a timing thing that concerned everybody,” he said. “We don’t want one front-running the other. The reason you would monitor them is to be sure that she wasn’t taking the other ideas of Brahman people before they came out. There was nothing at all to that.”
Gupta left Brahman last year and in January started his own event-driven fund, Adi Capital Management LLC, which has about $180 million in assets, according to a letter obtained by Bloomberg News. He disclosed his relationship with Chopra in an Feb. 25 SEC filing, noting the two firms share a similar investment strategy.
Endowments, Pensions
“Mr. Gupta and his spouse do not discuss any information related to their funds’ current investments, potential investments, investment strategies or other confidential investment-related information,” the filing said. Chopra didn’t disclose their relationship in Ratan’s filing with the SEC.
Chopra counts sovereign wealth funds, endowments, state pension plans and insurance companies among her firm’s clients, according to a person with knowledge of Ratan’s investors. She’s also got Robertson’s full backing.
“All you have to do in hedge funds is perform,” he said in Bloomberg News reporter Katherine Burton’s 2007 book “Hedge Hunters.” “If you perform, money is going to pour in.”
Robertson’s backing still carries a lot of weight with hedge-fund investors, though the billionaire’s judgment isn’t infallible, according to Sean Bill, trustee on the City of San Jose Police and Fire Retirement Plan, which has $3.3 billion in assets and hasn’t considered investing in Ratan.
“Tiger definitely had a lot of success along the way — it’s hard to go against him,” Bill said of Robertson. At the same time, “several guys have blown up,” he said. “It’s happened.”