Richard Elden, Innovative Hedge Fund Investor, Dies at 84
Posted July 13, 2018 11:05 p.m. EDT
Richard Elden, a journalist-turned-investment manager who was an early investor in a number of notable hedge funds, died June 27 at his home in Chicago. He was 84.
The cause was metastatic melanoma, his son, Tom, said.
Elden founded Grosvenor Partners (now GCM Grosvenor), considered the first American fund-of-funds, in 1971.
The previous two years, while Elden was working as an analyst for the Chicago brokerage and investment bank A.G. Becker & Co., had been rough for the stock market. And Elden had become intrigued by the notion that high returns — with relatively low exposure to the ups and downs of the broader market — could be made available by using strategies that involved non-stock investments in options markets. He had read about such strategies in the 1967 book “Beat the Market: A Scientific Stock System,” written by Sheen T. Kassouf and Edward Thorp, who is known as one of the fathers of quantitative investing.
“He was producing better absolute returns and, more importantly, better risk-adjusted returns than investing in a good portfolio of stocks,” Elden said of Thorp in a 2014 article published in Institutional Investor.
In its early years, Grosvenor focused on placing clients’ money in investments similar to those described in Thorp’s book. But rather than invest solely in a single fund, Elden decided to parcel out investments among a number of funds, similar to the diversification strategies that came to be known as modern portfolio theory.
That approach essentially marked the start of the American fund-of-funds industry.
Funds-of-funds are essentially hedge funds that try to manage risk by diversifying their investments in a number of other hedge funds. While such an approach had been taken by funds in Europe, Grosvenor Partners is widely considered the first American fund-of-funds.
“The idea was to have some diversification in terms of manager and strategy and have a portfolio of investments like this, instead of investing in the stock market, which was more challenging,” Tom Elden said.
That search for diversification, and a career that spanned virtually the entire history of the hedge fund industry, brought Elden into contact with some of the world’s most prominent hedge fund managers, including Julian Robertson of Tiger Management, David Einhorn of Greenlight Capital, Stephen Mandel of Lone Pine Capital, Michael Steinhardt of Steinhardt Partners and the well-known activist investor Carl Icahn.
In 1998, the Connecticut-based company Value Asset Management bought a majority stake in Grosvenor. Elden left Grosvenor in 2005, when the fund was managing $13.4 billion, according to a statement from his family. Today the firm has roughly $50 billion in assets under management.
Besides his son, Elden is survived by his wife of 57 years, Gail; his daughter, Cindy Elden; and his sister, Joan Feitler.
Richard Elden was born on Aug. 2, 1933, in Chicago. His father, Abe, worked in the financial division of Esquire Inc., the media company best known for its men’s magazines. His mother, Vera, was a homemaker and the sister of David Smart, Esquire’s publisher.
Elden worked on the student newspaper at Northwestern University, where he studied political science and graduated in 1956. He traveled as part of a group of student journalists to the Soviet Union in 1953.
He wrote a number of articles about that journey, which helped lead to reporting positions at the International News Service, which merged with United Press in 1958, as well as with the now-defunct City News Bureau of Chicago and the Chicago Sun-Times, where he worked as a business reporter. He attended business school at the University of Chicago, receiving a master’s degree in business administration in 1966.
Elden was working as a financial analyst for a division of IBM that published educational materials when he was approached by a friend who appreciated his reporter’s instincts. The friend asked him to work as an investment analyst with A.G. Becker, where his job was to scour the markets for investment opportunities for the firm’s clients.
Throughout his career, Elden, a lifelong Chicago resident with a penchant for horn-rimmed glasses and bow ties, often referred to his reporting background as an ideal training ground.
“Essentially I’ve been a reporter for 55 years, the last 38 applying my reporting skills to checking out money managers,” he was quoted as saying in “Top Hedge Fund Investors: Stories, Strategies, and Advice” (2010), by Cathleen M. Rittereiser and Lawrence E. Kochard. “To me, it’s just an extension of reporting.”