KKR Co-Founder Kohlberg Dies | Chief Investment Officer

Jerome Kohlberg Jr, co-founder of investment group Kohlberg Kravis Roberts & Co (KKR), died last week at the age of 90.

According to Reuters, Kohlberg died at his home in Martha’s Vineyard, Massachusetts, from cancer.

He founded KKR with former Bear Stearns colleagues Henry Kravis and George Roberts in 1976, and built up the firm over the next 11 years. According to KKR’s website, the first US state pension funds invested in the group’s private equity funds in 1982.

Initially focused on leveraged buy-outs—an area in which Kohlberg is considered a pioneer—KKR has since diversified into other areas such as real estate, infrastructure, and hedge funds.

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Kohlberg left KKR in 1987 to set up his private equity group, Kohlberg & Company, which focuses on “middle market” investments. The firm has completed transactions worth roughly $10 billion since its launch, according to its website. He retired from the firm in 1994.

KKR Co-Chair and Co-CEO George Roberts told Reuters that “Jerry was a man of integrity and moral courage. Jerry cared about people and gave freely of his time and wealth. Henry and I are proud that our firm’s name is Kohlberg Kravis Roberts.”

Managers who have trained directly under legendary investor Julian Robertson are capitalizing on their winners and cutting their losers better than their master, according to Novus.

The analytics firm found so-called “Tiger Cub” funds—controlling more than 68% of all Tiger-affiliated assets—had a win/loss ratio of 3.37, much higher than the original Tiger Management’s 2.43.

Hedge funds that have been seeded by Robertson and those that have worked at either a Cub fund or a Seed fund had a 1.94 and 2.22 win/loss ratio respectively, the data showed.

Novus Tiger Source: NovusHowever, Robertson’s fund had more winning trades overall, scoring a batting average of 66%. Cub funds came in lower at 57%, while Grandcubs and Seed funds dipped lower at 56% and 52% respectively.

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Tiger Cubs, controlling nearly $177 billion in assets, also showed consistent outperformance over the last decade, Novus said.

According to its current data, Cub funds returned 8.7% year-to-date compared to 3.2% for S&P 500. They also outperformed the S&P 500 by 53.9% from 2006 to 2014.

“As a group, managers who fall under Julian Robertson’s Tiger family tree significantly outperformed their benchmark, as their common philosophy of investing in undervalued companies, however defined, bore fruit,” Novus’ 2014 report said.

In addition to sharing a common pedigree, Tiger-affiliated funds showed overlaps in sector selections.

Novus found the Cubs generally favored consumer discretionary and information technology sectors and tended to stay loyal to these areas over the years.

“Tiger Cubs shine in technology, healthcare, consumer discretionary, all areas of relative overweight,” the report said. “This implies that the Cubs know what they are good at and they stick to it.”

Consensus among Tiger-affiliated funds paid off significantly, Novus said, while contrarian security selections ran the danger of underperformance.

Novus Tiger1 Source: Novus

Despite their overall stock selection skill, a number of Tiger alums have been shutting down recently.

In May, it was reported JAT Capital Management—a $1.7 billion long/short equity hedge fund—was returning capital and becoming a family office.

The firm, specializing in technology, media, and telecommunications stocks, lost 6% in 2008 but ranked among the industry’s top performers in 2013 with a gain of 30.6%.

Another Cub firm, Tiger Global Management, announced it had lost two of its most senior investment executives this May.