Chase Coleman’s hedge fund Tiger Global posted huge losses in the second quarter amid a tech stock rout that has underperformed the performance of one of the world’s largest hedge funds.
According to a letter sent to investors seen by the Financial Times, the firm’s management posted a 63.6 per cent decline in the second quarter after fees, while the firm’s flagship fund declined 50 per cent in the first half of the year after fees. Of. ,
“In reflection in the first half of the year, it is clear that we underestimated the impact of rising global inflation and entered 2022,” the firm told investors.
Tiger Global said it had brushed off inflation fears in the past because it believed the era of technological change was “deflationary”, a maneuver that worked through a post-crisis bull market in stocks. was.
Over the past decade, the hedge fund’s enormous exposure to technology and software companies in the US and China has made it one of the best performing and fastest growing hedge funds in the world, with profits of tens of billions of dollars. has been done.
However, Russia’s invasion of Ukraine, coupled with rising inflation and a flabby Federal Reserve, left the fund unprepared.
“This time, however, we did not appreciate how unique the circumstances were, which enabled inflation to rise and continue to rise,” the firm said, acknowledging that it was susceptible to more volatile financial markets.
Tiger could not be immediately reached for comment.
The defeat has broken Tiger’s remarkable record. Its flagship fund, launched in 2001, has now reported a net annualized return of less than 15 per cent, while the only fund launched in 2013 has given an annual average return of less than 4 per cent.
The firm’s vast portfolio of private investments continued to cushion the blow of losses from its stake in liquid public markets.
A “crossover” strategy fund, which combines Tiger’s publicly traded and privately held investments, shed about 37 percent on a net basis in the first half of 2022.
The firm further reduced its portfolio of private holdings in the second quarter, despite what was marked by a substantial cash position and “positive operating performance overall.”
Tiger said its small portfolio has been profitable for the year, and it was choosing its spots in China carefully amid high regulatory risk and the Covid shutdown.
Although Tiger admitted to having misjudged market volatility this year, he told investors he would maintain the same approach as established by Coleman in the wake of the dotcom bust. Coleman started Tiger Global after working under hedge fund billionaire Julian Robertson, who spun off Tiger Management in 2000.
,[W]We believe that the same approach we applied in those first 20 years – with additional perspective from the scars of reform and new war – will recover damages and generate long-term, superior performance which is our mission and expectation. ,” the investor letter said.
The firm is trimming holdings in groups that have “less conviction”, and increasing its position in businesses it considers “the best companies at interesting prices”.