Tepper’s Next Play: Hedge Fund Star Makes a Break for the NFL

(Bloomberg) -- For most of his life, David Tepper has enjoyed two passions: trading and football.

Now Tepper, among the most celebrated financial speculators of his generation, is planning to end his career as a hedge fund manager to focus on the glitzy world of professional sports. He bought the NFL’s Carolina Panthers last year and plans to spend more time running it.

The move caps an exceptional quarter-century run and marks the end of an era for the Darwinian world of hedge funds. Tepper, 61, is the highest-profile manager to depart since Stan Druckenmiller shuttered his firm eight years ago.

Even Tepper found markets tough to navigate last year and lost money. The hedge fund industry, which was once the most coveted in finance and turned mere traders into billionaires, has for years been blighted by poor performance and shrinking assets. The challenges of the business have proved insurmountable for many managers.

“It is a testament to his integrity that at this stage of his career he no longer wants to manage others’ money for a fee now that he has other areas of focus in his life,” Druckenmiller said Thursday.

In the past year, billionaire John Paulson said he may convert his hedge fund to one that solely manages his fortune. Bill Gross threw in the towel. Other managers exiting include John Griffin and one of Tepper’s mentees, veteran stock-picker Alan Fournier.

Tepper hasn’t made a final decision on when he will return money to investors, according to his spokesman, Jonathan Gasthalter. He also hasn’t decided what his Appaloosa Management will look like in the future, whether he will manage capital for a select few or none at all.

Tepper has been an agile trader of a variety of assets from distressed credit to recently embracing activist investing. Most notable was his stand-out recovery amid the financial crisis. He lost money in 2008 only to win big in 2009 by betting on a rebound of bank stocks. His firm has produced annualized returns of 25% since its 1993 inception.

Three years ago, he moved from New Jersey to Florida, which has no state income tax. His next big move was to buy the team last year, which is no less of a hot seat job than navigating the markets in the age of Trump, Brexit and algorithms.

‘Winning’

Right after acquiring the Panthers for $2.3 billion, a record for a U.S. sports team, Tepper played up his passion for success to local reporters, saying “The first thing I care about is winning. The second thing I care about is winning.”

But his first year of ownership has hardly been victorious.

The National Football League team had a losing season. Quarterback Cam Newton had shoulder surgery in January and the team needs a new headquarters and a practice facility.

It’s a heady new chapter for a working class kid from Pittsburgh. Born in 1957, Tepper began buying penny stocks in high school. As a student at the University of Pittsburgh, he developed a system for options trading that helped pay his expenses.

Tepper got his start at troubled Republic Steel Corp. in Cleveland, giving him first-hand experience at a distressed company. He joined Goldman Sachs Group Inc. in the 1980s on its high-yield bond desk. Among his mentors was Robert Rubin, the former Treasury Secretary.

Junk Bonds

As the 1980s junk-bond rally gathered steam, Tepper’s desk became one of Goldman’s most profitable. But one lucrative honor eluded him: a coveted partnership. So Tepper quit to start Appaloosa in 1993 with $57 million. He says he chose the name partly because his first choice, Pegasus -- the winged horse of Greek mythology -- was taken.

After turning his hedge fund into a multi-billion-dollar business, he’s taking on a new chapter with a different set of concerns, from building a talented football roster to navigating state politics.

One of Tepper’s biggest priorities with the Panthers is a new headquarters and practice facility, something he’s been touting since his introductory press conference last year. Earlier this month, the South Carolina Senate agreed to give the Panthers around $115 million in tax discounts if the team moves across the border from North Carolina.

While Tepper was a winner in his long career in investing, reaching the top of professional football with a Super Bowl victory -- something that has eluded the Panthers -- may be no less challenging.

--With assistance from Katherine Burton, Eben Novy-Williams and Melissa Karsh.

To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net

To contact the editors responsible for this story: Alan Mirabella at amirabella@bloomberg.net, ;Margaret Collins at mcollins45@bloomberg.net, Vincent Bielski

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