Lessons from Andreas Halvorsen

Andreas Halvorsen, the Norwegian-born co-founder of the powerhouse hedge fund Viking Global Investors, is a towering figure in the world of finance. A "Tiger Cub" mentored by the legendary Julian Robertson, Halvorsen has carved a path of remarkable success through a disciplined and research-intensive investment approach. Despite his preference for a low public profile, his rare interviews and the enduring principles of his firm offer a wealth of knowledge for investors.

On Investment Philosophy and Strategy

Focus on the fundamentals. Viking's core strategy is built on a deep, research-intensive, and long-term focused investment approach, using fundamental analysis to select investments across various industries and geographies. [1][2]
Employ a long/short equity strategy. Halvorsen's firm is known for its long/short equity strategy, which allows it to profit from both rising and falling markets by investing in undervalued companies and shorting overvalued ones. [3][4]
Believe in the power of stock picking. Halvorsen is a stock picker at heart, believing that thorough analysis and disciplined valuation over time will yield a diversified portfolio of longs and shorts with a profitable spread. [5]
Adaptability is crucial. The financial markets are dynamic, and a key to Halvorsen's success is his ability to evolve his strategies to stay ahead of trends. [4]
Combine quantitative and qualitative insights. His approach is methodical, blending quantitative analysis with qualitative insights to construct portfolios that align with Viking's risk-return objectives. [4]
Diversification is a core tenet. Halvorsen advocates for balancing public and private investments, as well as long and short positions, to mitigate risk and improve risk-return ratios. [3]
Invest with high conviction. When Viking's research points to a strong opportunity, they are known to take significant positions in those companies. [5]
Prioritize long-term thinking. Decisions are made with a focus on sustainable growth rather than short-term gains. [3]
Generate returns regardless of market direction. The long/short strategy is designed to produce positive returns even when the broader market is down. [3]
Maintain a global perspective. Viking Global Investors evaluates a wide spectrum of investment opportunities across the globe. [6]

On Management and Company Analysis

"Good management teams are extremely underappreciated in their ability to take market share, even in low growth environments." [1] This underscores his belief in the significant impact of strong leadership.
"Poor management teams are underappreciated in that they can destroy things quicker than you think." [1] The flip side of his focus on management is a keen awareness of the damage weak leadership can inflict.
Talk to competitors and suppliers. To understand the competitive landscape of an industry, Halvorsen's firm speaks with a company's rivals and suppliers. [1][2]
Align with management's vision. He prefers to invest in a company where the management team's view of the industry's underlying dynamics is similar to Viking's own analysis. [1]
Assess the quality of the management team. A thorough assessment of the management team is a key component of Viking's investment process. [2]
Look for deep industry expertise. Viking encourages its analysts to become industry specialists, enabling them to understand the companies they cover in fine detail. [2]
A multi-stage vetting process is essential. Every investment undergoes a thorough, multi-step analysis to ensure it aligns with the firm's philosophy. [3]
Seek companies with sustainable advantages. The focus is on businesses with a clear edge that can be maintained over the long term. [3]
Identify significant growth potential. Viking looks for companies with the potential for substantial growth, avoiding speculative trends. [3]
Understand the business model inside and out. A deep understanding of how a company operates and creates value is fundamental to the investment decision. [2]

On Risk Management and Discipline

"It's a heart-wrenching activity, because you can lose a lot of money doing it." [1] Halvorsen's take on short-selling highlights the inherent risks.
When you are wrong on a short, "you have to get out very quickly, which means you can't have very large positions." [1] This demonstrates a disciplined approach to cutting losses in short positions.
Centralize risk management. While investment research is decentralized, risk management at Viking is centralized to ensure comprehensive oversight and accountability. [2]
A military mindset informs his discipline. Halvorsen's background in the Norwegian special forces has shaped his disciplined leadership style, emphasizing preparation, adaptability, and precision. [3]
Maintain composure and avoid impulsive decisions. Sticking to a strategy and avoiding emotional reactions are critical for successful investing. [3]
Shying away from risk-taking goes against the reason to exist for an investment firm. In a 2008 letter, he emphasized that taking calculated risks is essential for generating attractive returns. [7]
Acknowledge and learn from underperformance. In a 2015 investor letter, he candidly acknowledged that solid stock picking was "overwhelmed by our relatively high net exposure during the broad market sell-off," demonstrating transparency. [8]
Don't be afraid to trim positions. Halvorsen is known to build a large stake and then slowly trim the position as the stock price rises. [5]
Balance risk and reward. The goal is to keep risk in check while generating solid returns. [5]
Intellectual honesty is a guiding principle. The firm is "guided by intellectual honesty" and inspired by the opportunity to improve. [6]

On Fees and the Business of Hedge Funds

Focus on net returns, not just fees. Halvorsen has argued that investors should be more concerned with the return they receive after fees are deducted, rather than the fees themselves. [1]
Active managers have different returns and fees. He draws an analogy to other businesses, pointing out that unlike index funds with similar "revenues" (returns), active managers have variable returns and fees, making a singular focus on fees illogical. [1]
Build an asset-management business that isn't dependent on any one individual. At a 2024 conference, he stated this was a key objective when starting Viking Global. [9]
Talent development is paramount. A focus on building a team capable of generating superior returns at low risk was a foundational goal for the firm. [9]
Capital is an outcome of strong investment returns. This statement from Viking's website encapsulates the firm's focus on performance. [6]
Strive for exceptional outcomes. This is a stated aspiration of the firm he leads. [6]
Care about investors, people, and communities. Viking's philosophy extends beyond just financial returns. [6]
Continuously seek to improve. The team at Viking aims to "become better at what we do, every day." [6]
Our job is to achieve maximum capital appreciation commensurate with reasonable risk. A quote attributed to him that succinctly summarizes his firm's mission.
There will be a complete separation between portfolio and risk management. This structural principle ensures objectivity in risk oversight.

On Mindset and Personal Attributes

Patience is a virtue in any business, including hedge funds. Halvorsen has emphasized the importance of having a long-term perspective. [1]
A disciplined mindset is a key to success. His background in the Norwegian Naval Academy instilled a strong work ethic and discipline. [10]
Maintain a low profile. Unlike many of his peers, Halvorsen rarely gives interviews and prefers to stay out of the media spotlight. [5]
Courage to chart one's own course. The name "Viking Global" is a nod to his Norwegian heritage and symbolizes an ambitious and strategic approach to markets. [3]
Integrity is paramount. Halvorsen is known for his integrity, which has helped him earn the trust of his investors.
Embrace intellectual rigor. He has fostered a culture where analysts and portfolio managers are encouraged to challenge assumptions and think independently. [4]
Philanthropy is a responsibility. Through the Viking Global Foundation, he supports educational initiatives and charitable causes. [4]
Perseverance and vision are essential. His journey from a "Tiger Cub" to the head of a multi-billion dollar hedge fund is a story of these qualities. [4]
Stay grounded. Despite his immense success, he remains deeply connected to his roots and values. [4]
"We think that the secular shift of advertising dollars from traditional media to search and YouTube will drive substantial revenue growth going forward." A rare specific stock-related comment from a 2015 investor letter regarding Alphabet (Google), showcasing his forward-looking analysis. [8]

Learn more:

Lessons from Andreas Halvorsen

On Investment Philosophy and Strategy

On Management and Company Analysis

On Risk Management and Discipline

On Fees and the Business of Hedge Funds

On Mindset and Personal Attributes

Written by Antoine Buteau

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