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Richard Elden, a Pioneering Hedge Fund Investor, Died at the age of 84

Richard Elden, a Pioneering Hedge Fund Investor, Died at the age of 84
Richard Elden, a Pioneering Hedge Fund Investor, Died at the age of 84

Richard Elden, a journalist-turned-investment manager who was an early investor in several well-known hedge funds, died on June 27 at his Chicago home. He was 84 years old when he died.

According to his son, Tom, the cause was metastatic melanoma.

In 1971, Mr. Elden established Grosvenor Partners (now GCM Grosvenor), widely regarded as the first American fund of funds.

The stock market had been struggling for the previous two years. And Mr. Elden, who worked as an analyst for the Chicago brokerage and investment bank A. G. Becker & Company at the time, was intrigued by the idea that high returns could be achieved using strategies that involved non-stock investments in options markets, with relatively little exposure to the ups and downs of the broader market.

He’d read about such strategies in Sheen T. Kassouf and Edward O. Thorp’s 1967 book “Beat the Market: A Scientific Stock System,” which is considered a father of quantitative investing.

In a 2014 article published in Institutional Investor, Mr. Elden said of Professor Thorp, “He was producing better absolute returns and, more importantly, better risk-adjusted returns than investing in a good portfolio of stocks.”

Grosvenor’s early years were spent putting clients’ money into investments that were similar to those described in Professor Thorp’s book. Rather than investing solely in one fund, Mr. Elden decided to spread his money across several, similar to the diversification strategies that became known as modern portfolio theory.

The fund-of-funds industry in the United States began with this approach.

Funds-of-funds are essentially hedge funds that try to mitigate risk by investing in a variety of other hedge funds. While funds in Europe had taken this approach, Grosvenor Partners is widely regarded as the first American fund of funds.

“The idea was to have some diversification in terms of manager and strategy, and to have a portfolio of investments like this, rather than investing in the stock market, which is more difficult,” Tom Elden explained.

Mr. Elden met some of the world’s most prominent hedge fund managers during his search for diversification, including Julian Robertson of Tiger Management, David Einhorn of Greenlight Capital, Stephen Mandel of Lone Pine Capital, Michael Steinhardt of Steinhardt Partners, and activist investor Carl Icahn.

Value Asset Management, based in Connecticut, purchased a majority stake in Grosvenor in 1998. According to a statement from his family, Mr. Elden left Grosvenor in 2005, when the fund was managing $13.4 billion. The firm now manages approximately $50 billion in assets.

Mr. Elden is survived by his wife of 57 years, Gail; his daughter, Cindy Elden; and his sister, Joan Feitler, in addition to his son.

Richard Elden was born in Chicago on August 2, 1933. Abe, his father, worked in Esquire Inc.’s financial division, which is best known for its men’s magazines. Vera, his mother, was a stay-at-home mom who was also the sister of David Smart, Esquire’s publisher.

Mr. Elden worked on the Northwestern University student newspaper while studying political science. In 1953, he and other student journalists traveled to the Soviet Union and wrote articles about their experiences.

Those articles helped him get reporting jobs at the International News Service, which merged with United Press in 1958, as well as the now-defunct City News Bureau of Chicago and The Chicago Sun-Times, where he worked as a business reporter after he graduated in 1956. In 1966, he graduated from the University of Chicago’s business school with a master’s degree in business administration.

Mr. Elden was working as a financial analyst for IBM’s educational publishing division when he was approached by a friend who admired Mr. Elden’s journalistic instincts. A friend invited him to work as an investment analyst at A. G. Becker, where he would scour the markets for investment opportunities for the firm’s clients.

Mr. Elden, a lifelong Chicago resident who favors horn-rimmed glasses and bow ties, often referred to his reporting background as an ideal training ground throughout his career.

“I’ve basically been a reporter for 55 years, the last 38 of them applying my reporting skills to checking out money managers,” he was quoted as saying in Cathleen M. Rittereiser and Lawrence E. Kochard’s book “Top Hedge Fund Investors: Stories, Strategies, and Advice” (2010). “It’s just a natural extension of reporting to me.”

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