When a top hedge fund manager donated money to start a student-run portfolio at the University of Virginia in 1994, Richard Gerson was one of the few undergraduates to earn a spot managing the six-figure portfolio.
It was the first connection of many that paved his way to the upper echelons of the hedge fund industry.
Mr. Gerson parlayed his college experience into an internship at Tiger Management, the vaunted hedge fund firm run by Julian Robertson. He then helped John Griffin, a top deputy of Mr. Robertson and the sponsor of the investment club, start Blue Ridge Capital.
Now, Mr. Gerson, 37, is building a new firm.
Mr. Gerson and his business partner, Navroz D. Udwadia, have raised $1.2 billion for Falcon Edge Capital, according to people with knowledge of the matter. At a time when investors are reluctant to hand over money to unproven managers, Falcon Edge is the hedge fund equivalent of a high first-round draft pick.
Mr. Gerson is capita lizing on his background.
In a relatively young industry where stars can quickly fade, Tiger Management - and its myriad affiliates like Falcon Edge - is the closest thing to a hedge fund dynasty. After a brief career in finance, Mr. Robertson started Tiger in 1980 with seed money from friends and family. He regularly racked up double-digit returns by taking big positions in companies with good long-term growth prospects and aggressively betting against those stocks poised to fall.
Mr. Robertson trained his young protégés - the so-called Tiger cubs - in the same tradition, creating the next generation of hedge funds stars. After leaving Tiger in 1993, Lee Ainslie started Maverick Capital, which currently manages roughly $10 billion. Stephen F. Mandel Jr. began Lone Pine Capital in 1997. Two years later, Andreas Halvorsen opened Viking Global.
“We really gravitated to young people, and that was a great deal of our success,†said Mr. Robertson, 80, who often hired people in their 20s. “I was just an old goat with all these young geniuses around.â€
As the first wave of Tiger cubs age, they are breeding new funds, too.
Blue Ridge Capital, where Mr. Gerson honed his skills, has been a particularly good incubator for talent. While Blue Ridge has subscribed to the long-term strategy of Tiger, the founder, Mr. Griffin, has infused the firm with his own philosophy. As a proponent of behavioral finance, he trained analysts like Mr. Gerson to identify how ego and emotion can affect the market and stock performance.
The fund, which is named for the mountain range that run through several Eastern states, has returned an average of 20 percent a year since 1996, compared with 8.9 percent for the Standard & Poor's 500 index. Despite strong demand, Blue Ridge has refused new investments for most of the last decade.
The blend of success and exclusivity has created a halo effect for its graduates. Christopher R. Hansen, the founder of the $2 billion Valiant Capital, was an early investor in Facebook. David Greenspan, another Blue Ridge Capital alumnus, is expected to raise more than $1 billion this year for his new firm, Slate Path Capital.
In building Falcon Edge, Mr. Gerson is tapping the wealth of relationships that he has cultivated over the last 18 years as part the Tiger family. He chats regularly with the billionaire commodities investor Thomas Kaplan, who has one of the largest private collections of Rembrandts. Nearly a decade ago, Mr. Gerson met the real estate magnate Sam Zell. The meeting was made possible through Mr. Gerson's brother, Mark, the co-founder of the Gerson Lehrman Group, a firm that connects industry specialists with investors.
Mr. Zell said he was so charmed by the young investor that he asked Mr. Gerson to join him for a trip to Egypt to meet with government officials and investors. Since then, Mr. Zell and Mr. Gerson have traveled extensively throughout the Middle East and Asia, including Iraq, Dubai, Cairo and Beijing.
“I don't think I've ever met anyone better at networking than Rick,†said Mr. Zell.
Mr. Gerson, who is known for his intense manner and boyish grin, is a force of personality.
While working on the student-run portfolio in 1994, he contacted Mr. Griffin, then the president at Tiger Management, for a job. Mr. Griffin was not planning on hiring any interns. But he relented after Mr. Gerson e-mailed him incessantly.
Mr. Griffin was impressed. When he branched out on his own the next year, he offered Mr. Gerson a job. In those early days of Blue Ridge Capital, Mr. Gerson picked stocks and helped shape investment decisions from his college dorm room.
At Blue Ridge, Mr. Gerson has developed a reputation as a rapid-talking, high-energy investor who can be equally blunt. While friends say that Mr. Gerson lacks the usual filter, it is usually interpreted as honesty rather than rudeness.
“He can get away with being very direct,†said Mr. Hansen, a former colleague and the founder of Valiant. “Other people may not be able to pull it off because people would think they have an agenda, but Rick is so good at admitting his mistakes.â€
A spokesman for Blue Ridge declined to comment.
Mr. Gerson did have to repent for a misstep in China. In 2006, Mr. Gerson oversaw a Blue Ridge private equity portfolio there with a local partner, raising $1.45 billion. But one of the fund's first investments, ITAT, became ensnared in a major accounting fraud, bruising Blue Ridge and other blue-chip investors, like Morgan Stanley and Merrill Lynch.
Soon after, Mr. Griffin unwound the fund and returned the money to investors, according to people with knowledge of the matter. But he was upfront about his mistakes. Mr. Gerson conceded to friends and colleagues that private investments in China were more difficult than anticipated and that t he team had overestimated its knowledge of the market.
Tiger ties do not always guarantee success. Chris Shumway, a top deputy of Mr. Robertson, shut down Shumway Capital in 2011 after investors revolted over some management changes.
The offspring of those Tiger cubs have faced their share of troubles, too. JAT Capital, started by an alum of Shumway Capital, is down nearly 20 percent in 2012, after stellar returns for years.
Since many of the managers are steeped in the same principles, some traders joke they often suffer from “group think.†The cubs tend to hold similar positions in certain companies, like Apple or MasterCard. These stocks are sometimes referred to as “101 Park†names, a nod to the building that housed Tiger Management and several affiliates.
Mr. Gerson is hoping to build something different, even as he borrows from the blueprints of Mr. Griffin and Mr. Robertson, according to several people with knowledge of the firm. Falcon Edge will own publicly traded stocks, but it will also make investments in private companies that are not listed on exchanges.
The firm plans to invest overseas, too. Mr. Udwadia, Mr. Gerson's partner, is an emerging-markets specialist from the well-known hedge fund Eton Park Capital Management. Mr. Gerson wants to focus on the Middle East, where he has spent years establishing ties.
But Mr. Gerson will be based in Manhattan.
Falcon Edge is just one floor below Blue Ridge Capital at 660 Madison Avenue.
