One of the most intriguing traders on the planet is George Soros.
In this text, we will see important steps and decisions and how George Soros made his fortune.
How Did George Soros Make His Fortune?
George Soros made his fortune because of many excellent decisions at the right moment, such as the right education, school choice, the right moment to create his own company, cooperation with Stan Druckenmiller, and investing in currency markets the moment when governments make bad decisions.
Step 1: George Soros got survival skills during the War
George Soros’s Jewish father, Tivadar Schwartz, was a prisoner in the first world war, the Russian revolution, and escaped Russia to reach his family in Budapest, Hungary. Soros was born on 12th August 1930 in Budapest. To avoid problems related to their Jewish religion, his father changed their last name from Schwartz to Soros. During the Nazi occupation, Soros experienced the increasing persecution of the Jews. To help people escape from the Hungary Nazi holocaust, he helped his father in forging documents. His family often went into hiding to escape atrocities. This period helped Soros improve his survival skills.
Step 2: George Soros picked the Right School at the right time
Soros joined the London School of Economics in 1947. Karl Popper, the philosopher who propounded the concept of open society opposing dictatorship, was his mentor. Popper influenced the philosophical, philanthropic attitude of Soros, who realized how brutal the dictatorships were. After completing his graduation, Soros got a finance-related job at a bank in London. Soros relocated to the United States in 1956 and started working as an arbitrage trader at F.M. Mayer, a firm in New York. He later worked as an analyst and trader at multiple firms on Wall Street. However, his major career break was in 1967, at Arnold&S. Bleichroeder, where he managed the First Eagle Fund, an offshore fund for the first time. This fund’s success led to the launch in 1969 of the Double-Eagle Fund, his second fund.
Step 3: At the right moment, Soros formed his own company – Quantum fund
In 1973, Soros left his job and formed his own company, Soros Fund Management, with his assistant Jim Rogers’s help. The hedge fund was initially renamed the Soros fund, and in 1978, it was renamed, Quantum Fund. Compared to the 47% returns over a ten-year period for the S&P 500 Index, the fund earned investors 4200% returns. Though Jim Rogers left the hedge fund in 1980, in 1981, Quantum Fund’s assets were valued at $381 million, while Soros was worth approximately $100 million. Though his investor profile hailed him as the greatest money manager in the world in 1981, Quantum fund made its first loss that year. It also faced redemptions, which reduced its capital by half. Soros allowed others to manage the hedge fund and took a break. In 1984, he returned to investing full time. In 1985, the fund generated 122% returns, and in 1986, the assets managed exceeded $1.57 billion.
Step 4: Excellent move to bring Stan Druckenmiller to manage the fund and make growth
Soros recruited Stan Druckenmiller to manage the Quantum fund in 1988. In the next few years, the returns were modest, peaking at 68.8%. However, Druckenmiller and Soros decided to short the British pound in summer 1992, resulting in a $1 billion profit. Similarly, the Swedish krona was also shorted in November 1992, leading to an additional $1 billion profit. The personal fortune of Soros increased by approximately $650 million in 1992. As a result, the assets managed by the Quantum fund increased to $8.3 billion in 1993.
Soros made a fortune investing in currency pairs at the moment when governments made bad decisions (bad forex market intervention or non-intervention). It was something like “sure bet on human stupidity.”
George Soros currency speculation examples:
How George Soros broke the bank of England
On 16 September 1992 was Black Wednesday in the UK currency markets. The problem started at the beginning of the 1990s because of high German interest rates caused by German reunification. Bundesbank tried to counteract inflationary effects, which caused stress across the European Exchange Rate Mechanism (ERM). UK currency market intervention idea: If the exchange rate goes near the permitted price level range around DM 2.773 (€1.4178 at the DM/Euro conversion rate), the UK government will intervene.
George Soros knew that artificial UK intervention is not a good idea, and he decided to build a huge short position in pounds sterling. Soros earned more than $1 billion on this short position against GBP. After this crisis, the British government was forced to withdraw the GBP from the ERM.
George Soros attack baht
Soros made a huge short trade of around $1 billion against the Thai baht during the Asian financial crisis in 1997. His prognostic ability showed that the Thai baht was overvalued, and his position made a huge fortune.
How George Soros Made billions In 2013
In 2013. Soros realized artificial intervention by the Japanese Prime Minister Shinzo Abe. Abe was engaging in extensive monetary easing to jump-start Japan’s stagnant economy. Soros was long the Nikkei, and he made Yen short position. In 2013, George Soros personally earned an estimated $4 billion.
George Soros philanthropy and family office
Soros Fund stopped accepting funds from outside investors and returned approximately $1 billion in client funds in 2011. It also was converted into a family office. The fund earned its investors a total of $43.9 billion, which was only exceeded by the $58.5 billion made by the Bridgewater fund of Ray Dalio. The Soros Fund now mainly exists to provide money to Soros’s charity, the Open Society Foundation. Soros has donated a total of $32 billion to the foundation, contributing $18 billion and appointing Dawn Fitzpatrick as its chief investment officer(CIO). She manages $25 billion of the organization’s assets and aims to make $1 billion annually to fund its activities.
George Soros is the founder of Soros Fund Management LLC and also its chairman. In April 2020, his net worth was estimated at $8.3 billion. According to Forbes, Soros is ranked 56th among the richest persons in the United States and 162nd globally. Soros is considered one of the greatest speculators in the financial markets globally, and this helps to make a huge amount of money quickly. In 1992, he bet against the British pound and made profits of more than $1 billion, earning the title of the person who “broke” the Bank of England. For 25 years, his Quantum fund gave investors annualized returns of more than 35%. Through his philanthropic activities are acclaimed, his political statements remain controversial. More details on how Soros became a billionaire are discussed.