Nehal Chopra’s Secret to Finding Alpha: A-Plus CEOs

For Nehal Chopra, investing is all about people. As an event-driven long-short equity manager looking for companies undergoing significant change, Chopra is very focused on the quality of corporate management — in particular, CEOs. She wants to know who they are, why they are in their positions and how they get paid.

“My mom taught me very early on that people matter,” says Chopra, 34, who grew up in Mumbai and came to the U.S. in 1998 to attend the University of Pennsylvania’s Wharton School. “We invest only with A-plus managers and A-plus CEOs.”

That formula has worked well for Chopra since she launched the Tiger Ratan Capital Fund in May 2009 with $25 million in seed money from legendary hedge fund manager Julian Robertson Jr. The now-$750 million fund has delivered net annualized returns of more than 20 percent and was up 46.8 percent in 2013. Chopra recently moved Ratan Capital Management to new digs one block away from the Park Avenue offices of Robertson’s Tiger Management Corp., which she called home for Ratan’s first five years.

Like many hedge fund managers who got their start under the tutelage of Tiger, Chopra is extremely competitive. As a teenager she was a top-ranked tennis player in India. At Wharton she was accepted into the elite submatriculation program and began taking classes for her MBA at the same time she was completing her BS in economics. She spent the first few years of her career as an investment banking analyst in New York, first at UBS and then at Lehman Brothers Holdings, before joining the event-driven-investment team at alternative-asset manager Ramius as an analyst in 2005. There she tried to find merger targets and spin-offs that could make the firm a quick 20 to 30 percent return.

“如果事件发生了，我们通常会卖掉安全性，然后我会观看迅速的实体上升了更多，”她说。“我想知道，为什么我们努力工作，在短期观点时，我们可以在长期观点达到200％到300％的情况下努力，这是短期的观点？”

Chopra有机会管理her first portfolio in 2007, when she jumped to multistrategy hedge fund firm Balyasny Asset Management. There she refined her strategy of identifying great companies that were undergoing major changes but waiting for the changes to happen before actually investing in them. “Corporate change creates confusion, and that confusion creates price dislocation,” Chopra explains. “We want to take advantage of those mispricings to generate returns over a long period of time. So we look for spin-offs, companies emerging from bankruptcy, transformational mergers and new-CEO situations.”

Josh Birnbaum Nehal Chopra. Deepak. 古拉蒂 格雷格 利马曼 杰弗里 Smith

在Balyasny的一年中，Chopra即使在她周围旋转的金融危机，也会对她的投资方式充满信心。2008年底，她伸手去罗伯逊，她在慈善活动中遇到的，要求他随着她推出自己的基金而与她合作。在Chopra提供电池后，以评估她的心理化妆，智力和与他人合作的能力，老虎创始人印象深刻。“尼海是一个该死的好经理，”他说。“我们测试了她，她很强大，我们决定支持她。”

用单一的分析师在虎公园大道办公室工作，以帮助她，Chopra开始构建她的投资组合。One of her first investments was a small specialty drug company called Valeant Pharmaceuticals International, which had hired former McKinsey & Co. executive J. Michael Pearson as CEO in 2008. When Chopra learned that Pearson had grown the consulting firm’s global pharmaceuticals practice tenfold over ten years and that his former colleagues at McKinsey were buying stock in Valeant, she was intrigued. After more analysis she realized that the drugmaker had a good business but had been mismanaged and had huge potential for cost-cutting.

“When we met the CEO, he said: ‘I’m going to fix legacy Valeant. Once I fix Valeant, I’m going to go out there and buy more companies that are like Valeant — mismanaged and badly run — and fix them.’” Chopra recalls. “And I was thinking, If you just fix Valeant, it will be a great investment.”

Pearson fixed Valeant. He slashed R&D spending and instead focused on buying small drugmakers with products already on the market in areas, like dermatology, that don’t compete head-to-head with Big Pharma. In June 2010, Valeant announced that it was merging with Biovail Corp., Canada’s largest drugmaker, in what Chopra calls a transformational deal. When Tiger Ratan started buying Valeant in 2009, the company had $830 million in annual revenue and a $2 billion market cap. Today, Quebec-based Valeant has close to $6 billion in annual revenue and a $42 billion market cap.

For Tiger Ratan, Chopra runs a concentrated portfolio, with 20 to 25 core long positions and 20 to 35 shorts. She looks for companies like Valeant, with strong free cash flow, and avoids those in industries that are cyclical or tied to the strength of the economy. “If you buy a commodity business and the price of copper goes from $2 to $1 a pound, it doesn’t matter how great the CEO is,” Chopra explains. “We want to find businesses where the CEO can have a lot of impact.” Not surprisingly, Tiger Ratan tends to own health care, consumer staples and services companies.

因为Chopra着眼于催化剂驱动的投资，这可能需要三年或更长时间来提供他们的全部潜力并运行集中的投资组合，她不需要一个大团队。拉丹首都只有六人，投资和运营之间均匀分裂。“我们总是有一个精益的投资团队，”Chopra说。“我倾向于参与每个想法，这永远不会改变。如果我们变得太大，我会最终成为瓶颈。“