Investor Ron Pollack Talks About His Close Circle

Investor Ron Pollack Talks About His Close Circle

It was only a few weeks ago that I finally got to meet Ron Pollack (http://www.ronpollack.net), the guy responsible for establishing what would eventually become one of the largest hedge funds in the United States, with a peak value of over a billion dollars. In early June, we had our meeting in a Florida office. He was casually dressed in shorts and a t-shirt; passing him on the street, you wouldn't have guessed the vast wealth he controls. Pollack discussed his background as a short seller and hedge fund manager, the nonprofits he works with, his family, and his decision to get back into short selling after a six-year layoff in the interview. Short selling is Pollack's specialty; therefore, he feels compelled to return to the profession.

Pollack knew Jim Chanos (who is widely credited with exposing Enron as a fraud) in the 1980s when they were both young executives. He also knew Zoe Cruz (a brilliant commodity trader who rose to the co-presidency of Morgan Stanley and a sectionmate of Pollack's at HBS), Jamie Dinan (CEO of JP Morgan Chase and a former pick-up basketball partner of Pollack's at HBS), and Strauss Zelnick (CEO of Morgan Stanley).

And Pollack, who graduated from Yale with the highest honors (Magna Cum Laude) and went on to get an MBA and a law degree from Harvard, is no exception. To perfect his abilities as an investment banker and then as a hedge fund manager, Pollack headed to Wall Street after finishing his academic studies. 

The Feshbach Brothers, early players in the short-selling sector, provided Pollack with the education he needed to forge a successful career in the field before he struck out on his own. When Pollack left Feshbach in the early 1990s, he started a successful family of hedge funds. His short story, "Dancing Bear," became particularly well-known. At the end of 2001, though, Pollack began considering alternative ways to devote more time to his growing family and charitable work.

Following the 9/11 terrorist attacks, "I was touched by what happened and truly wanted to contribute," Pollack recalled. Markets were volatile for months after the attack, and Pollack felt torn between his responsibilities to his growing family and his investment firm. In the month of November of that year, Pollack took his three young children and his pregnant wife on a trip. He had been watching the markets on his laptop in his hotel room when he called his wife to say that he had to return to work because things had gotten "too chaotic" in the financial world.

On the ride home, he began formulating a strategy that would enable him to devote more time to his family and community service. To free up more time for his outside interests, including charity work and becoming a father, Pollack merged his hedge fund business into the Monitor Group in Cambridge, MA, in 2002. During this time, he collaborated with the Vail Valley Foundation, the New York Rescue Workers Detoxification Foundation, and others to successfully organize fundraisers for ill New York City first responders, police officers, sanitation workers, and so on.

The occasional visit to the offices of fund managers was a necessary aspect of his fund-raising strategy. Given that he gave up trading to devote himself full-time to fatherhood and charity work, this news was bound to hit close to home. The truth is, Pollack never made more than one deal while volunteering.

Pollack won a day of stock trading and lessons with a local broker at a charity auction in Vail and used the money he won to go skiing. There was no way for this broker to determine who had actually won the auction. Obviously, he was taken aback by the level of expertise displayed by his guest. A short sale was closed, and Pollack knew he "still had it" inside the first 15 minutes.

Although the broker didn't recognize him at first, he was soon to learn that many people in the office were aware of his reputation as the architect of one of the most prosperous hedge funds in the United States. After seeking Pollack's counsel as a short sale guru, Ramsey Asset Management Chairman and CEO Russ Ramsey successfully launched a short sale-focused hedge fund. Pollack used this opportunity to learn more about the present market situation and the strategies of competing fund managers. He predicted that by now, other managers would have flooded the market with short sales. and they hadn't.

"Astounding, I tell you." In all the years I had been away, nothing had changed in the world of short-selling. To a large extent, they had not moved on from the methods we had developed in the 1980s, as Pollack yelled. When I switched to a new short-selling approach with Dancing Bear in the mid-1990s, I assumed that others would soon follow suit and that the short-selling market, like other hedge fund sub-sectors, would soon become saturated. Not only was there plenty of room to move around, but he also learned that very few bosses were thriving. Despite the fact that it was not yet the appropriate moment to return to this profession, he knew that this was ultimately what he wanted to accomplish.

As 2007 came to a close, Pollack made the decision to return to his former career as a fund manager. His time spent volunteering was rewarding, but he saw that he could make a greater impact on the organizations by earning and donating money. Even though he had liked his time away from the often stormy and stressful world of hedge funds, he found himself drawn back to it as his children grew older.

Put another way, "Although I've greatly appreciated my time away with my loved ones and the gratifying work done by my various charity organizations, I must return." "I really missed the excitement and thrill of investing, particularly shorting stocks."

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