Two of the biggest names in hedge fund lore built their careers on recognizing spectacular investments others couldn’t see. Alas, sometimes even legends flop. Alpha Hedge Fund Hall of Famers Bruce Kovner, head of $13 billion New York–based Caxton Associates, and Michael Steinhardt, the retired hedge fund manager who returned a net 24 percent annually over 28 years, were major backers of the now-defunct New York Sun. The conservative daily folded last month after six and a half years. Neither Steinhardt nor Kovner would comment, but insiders say the paper lost a total of $80 million.
The Sun’s circulation never exceeded 14,000 — a drop in the New York media bucket — so in hindsight it seems like a doomed enterprise from the get-go. Maybe that means Kovner and Steinhardt made a rare mistake, though of course that depends how one defines “mistake.” The paper gained a reputation for solid journalism, particularly in arts and culture coverage, and became a notable pro-Israel voice.
But the days of a small print daily’s wielding significant ideological influence are long gone, says Arlene Notoro Morgan, an associate dean at Columbia University’s Journalism School; these days even big newspapers are struggling to compete with the Internet and television. It used to be that “you had to read the newspaper because you didn’t have anything else,” Morgan says. “Now you have so much, you can just channel switch. It’s diluted the impact that one news organization can have.”
Impact aside, the Sun was simply not strong enough financially to weather some of the most volatile markets in history. “Among other problems that we faced was the fact that this month, not to mention this week, has been one of the worst in a century in which to be trying to raise capital,” Seth Lipsky, the Sun’s editor, told his staff in late September.
But the Sun was obviously not entirely — or even mostly — about money, because supporters like Kovner and Steinhardt stayed so loyal to the paper and sank so much money into it for so long. Behavior like this seems utterly irrational, of course, and begs the question of why such famously astute and notoriously disciplined investors commit enormous amounts of money to something as dicey as newspapers. “Because they love them,” Morgan says.
