Over the years, the largest hedge funds from Tiger management have posted excellent results, but in 2022 they have been losing money on both unicorns and Tech giants.
The volatile market
Philippe LaFond, Chase Coleman, and Andreas Halvorsen, the so-called Tiger cubs, suffered after taking a long position in tech sectors with high market valuations. They were surprised by the volatile market as so-called short positions were insufficient to cover the declines.
Founded by Coleman, Tiger Management saw its hedge fund slump by 34% in the first quarter of 2022, while Viking Global Investors, co-founded by Halvorsen, fell by 7.9%. Lafond’s backed Coatue Management fell by 9.9 %. Another offshoot of Tiger, D1 Capital Partners, fell 16% around the same time.
According to some investors, the large funds failed to anticipate the market rotation caused by inflation and the Ukraine war. Their big size prevented them from being nimble.
The Nasdaq 100 went into a bear decline of 20% in the first quarter through some losses were recovered towards the end of March. The S&P 500 Growth Index declined by 8.8%. Meta Platforms Inc., Netflix Inc., Amazon.com and Alphabet Inc., and Apple Inc. all were in the red, with two of them plunging by more than 30%.
Tiger Global’s six biggest holdings, including Microsoft Corp. and JD.com Inc., fell by double digits. DI Capital and Coatue Management which had large exposure in Riviana Automotive, dropped 52%. Other firms like Viking and Lone Pine Capital have the ten largest stocks in the third portfolio, including Amazon and Microsoft.
Another investor, Gabe Plotkin, who was tech-focused, faced a rough quarter losing 21% in Melvin Capital Management, valued at $10 billion. This followed a 39% loss decline in 2021.
Plotkin worked for Steve Cohen, a billionaire, in 2014 before starting Melvin Capital. He was considered the best performing stock picker till last year when the fund’s short position was hammered. Ken Griffin’s Citadel and Point72 Asset Management invested $2.75 billion in Melvin Capital last January and have now asked to withdraw all their funds from Melvin after the fund value plunged.
Dan Sundheim, the Viking Veteran and Co-founder of D1, saw its holding in Instacart fall by 40% in market valuation last month. The struggle of Instacart illustrates the larger issues for hedge funds that have moved into Venture Capital investments and brought along private wagers to boost performances.
D1 Capital hedge fund was up in 2021 by 21 %, which was powered by a 70% rise in private holdings while its public portfolio declined by 8%. Tiger Global hedge fund declined by 7% last year compared to a 54 % rise in its Private Investment Partners Funds.
One offshoot of Tiger which bucked the loss trend was SRS Investment Management, owned by Karthik Sarma. The $8 billion firms saw 9.8% growth in the quarter.
