Exclusive: Soros' son strikes out on his own

NEW YORK Sat Mar 31, 2012 4:01pm EDT

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NEW YORK (Reuters) - The upheaval within billionaire investor George Soros' firm continues as one of his sons is separating some of his personal fortune to manage it himself.

Jonathan Soros, who stepped down in September from day-to-day management of Soros Fund Management LLC, plans to hire at least one of his father's key employees, say two people familiar with the situation.

The two sources said Soros' son intends to set up his own family office - something the Soros Fund converted to last year - with the help of David Kulsar, currently chief risk officer for the Soros Fund.

"Jonathan wants to manage some of his own money so the (Soros Fund) family office has made that accommodation for him," said a source familiar with the situation but who was not authorized to discuss the matter.

Jonathan Soros, who was a law clerk for a federal judge before joining with his brother Robert in 2002 to oversee the management of Soros Fund, did not return calls or emails seeking comment. He currently is a senior fellow with the Roosevelt Institute, a liberal think tank group in New York.

Kulsar, who also did not return a phone call seeking comment, worked in risk management for John Meriweather's JWM Partners before joining the Soros Fund. Meriweather founded Long-Term Capital Management, the hedge fund whose collapse in 1999 sparked fears of a financial crisis.

YEAR OF CHANGE

There's no indication of a family feud between father and son - Jonathan Soros continues as chairman of his father's foundation. But the move comes after a year of a big changes and significant losses at the $25 billion firm founded by the elder Soros, a wealthy liberal philanthropist who rose to investing fame on his big bet against the British pound.

These developments are part of an ongoing series of structural changes as the Soros fund evolves as a family office, one of the sources familiar with the matter said.

Last summer, the Soros Fund announced it was returning some $1 billion to investors and would cease to operate as a hedge fund and would convert to a family office. The switch enabled the Soros Fund to avoid the March 30 deadline for registering as an investment manager with the U.S. Securities and Exchange Commission.

The firm now mainly manages money for the elder Soros, family and his foundation. George Soros has five children.

The changes continued in September with Scott Bessent, a former Soros disciple, returning to the firm to become chief investment officer and taking over the daily management of the firm from Soros' sons Jonathan and Robert.

Behind the scenes, it also was a rough year for the firm's main investment portfolio, the Quantum Fund. The fund declined about 15 percent last year, say two people familiar with the firm's performance who did not want to be identified because they don't speak for the firm.

The poor performance came in a year when the average hedge fund declined about 5 percent in 2011.

The Quantum Fund also took a big write-down on a $200 million investment it has with Philip Falcone's Harbinger Capital Management hedge fund, something Reuters previously has reported. Harbinger fell about 47 percent as Falcone's big bet on building a wireless network called LightSquared appears to be faltering.

The Soros firm ended a rough year by laying off a handful of analysts and portfolio managers. In December, a Soros spokesman called the layoffs part of the normal course of business at the firm.

(Reporting by Matthew Goldstein and Jennifer Ablan; Additional reporting by Svea Herbst-Bayliss; Editing by Edward Tobin, Gary Hill)

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