Billionaire hedge-fund manager George Soros lost nearly $1 billion as a result of the stock-market rally spurred by Donald Trump’s surprise presidential election.
But Stanley Druckenmiller, Mr. Soros’s former deputy who helped Mr. Soros score $1 billion of profits betting against the British pound in 1992, anticipated the market’s recent climb and racked up sizable gains, according to people close to the matter.
The two traders’ divergent bets are a stark reminder of the challenges even acclaimed investors have faced following Mr. Trump’s unexpected victory. Many experts had predicted a tumble for stocks in the wake of the election, but instead the Dow Jones Industrial Average has climbed about 9% since Election Day.
Stocks have fallen broadly in the past couple of sessions, hurt in part by a reversal for smaller companies and the financial industry. A decline in both sectors helped push the Dow industrials down more than 150 points in the past two sessions.
For the past couple of years, hedge funds and other professional investors have complained that placid conditions made it difficult to generate trading profits. Brevan Howard Asset Management LLP and Moore Capital Management, both multibillion-dollar hedge-fund firms, are among those that managed to turn a losing year into a winning one after the election, according to people familiar with them.
Last year, Mr. Soros returned to trading at Soros Fund Management LLC, which manages about $30 billion for Mr. Soros and his family. Mr. Soros was lured back by perceived opportunities to profit from economic troubles he was anticipating in China, within the European Union and elsewhere, according to people familiar with the matter.
Mr. Soros was cautious about the market going into November and became more bearish immediately after Mr. Trump’s election, according to people close to the matter. Mr. Trump has raised the possibility of tariffs on Chinese imports and other steps that could upend global trade, which had some money managers forecasting a move lower in stocks.
The stance proved a mistake—the stock market has risen over the past two months on expectations that Mr. Trump’s proposed economic policies will boost corporate earnings and the overall economy.
As a result, some of Mr. Soros’s personal trading positions incurred losses approaching $1 billion, the people say. Mr. Soros adjusted his positions and exited many of his bearish bets late last year, avoiding further losses, the people added.
The broader portfolio held by Mr. Soros’s firm performed better, thanks partly to gains achieved by his employees, posting profits before and after the election from long-held investments in sectors including financials and industrials, according to people familiar with the firm. Those gains, along with those achieved by some outside firms in which Mr. Soros’s firm invests, helped Soros Fund Management gain about 5% on the year.
Mr. Soros, chairman of the firm, continues to trade a portion of its cash in markets around the world, a strategy that can be quite volatile, the people said. In addition to Mr. Soros’s trading, his firm employs about 250 traders, analysts and other executives who do their own investing. The firm also invests in private-equity funds and other outside firms.
Soros Fund Management was converted by Mr. Soros from a hedge-fund firm managing outside investors’ money into a family office in 2011, partly to avoid additional regulatory scrutiny.
The firm is currently interviewing candidates for a vacant chief investment officer position. Some close to the firm say Mr. Soros could play a reduced trading role when someone is hired to fill the role. In recent years, the 86-year-old billionaire has focused on public policy and philanthropy. He was a large contributor to the super PAC backing Democratic presidential nominee Hillary Clinton and has donated to other groups supporting Democrats.
Mr. Soros, who was born in Hungary and came to the U.S. at the age of 26, found early success on Wall Street, where he helped pioneer the hedge-fund industry.
He has gained attention for his support of liberal causes and for funding local prosecutor races and other activities.Mr. Druckenmiller, who left Mr. Soros’s firm in 2000 and now invests his own money with his own firm, took a very different stance on the presidential election.
Days before the election, Mr. Druckenmiller predicted to a money manager that if Mrs. Clinton emerged victorious the stock market likely would rally initially but then would fall. Mr. Druckenmiller said if Mr. Trump won the election, the opposite result likely would occur—stocks first would tumble and then soar, according to the manager.