Chase Coleman’s hedge fund Tiger International ended the second quarter nursing heavy losses amid a tech inventory rout that has prompted efficiency throughout one of many world’s largest hedge funds to plummet.
An extended-only fund the agency manages ended the second quarter down 63.6 per cent after charges, in accordance with a letter it despatched buyers seen by the FT, whereas the agency’s flagship fund ended the primary half of the yr down 50 per cent after charges.
“In reflection on the primary half of the yr, it’s clear we underestimated the affect of rising world inflation and entered 2022 with an excessive amount of publicity,” the agency informed buyers.
Tiger stated it had prior to now disregarded fears of inflation as a result of it believed the period of technological change was “deflationary”, a manoeuvre that had labored by means of the post-crisis bull market in shares. Over the previous decade, the hedge fund’s heavy publicity to expertise and software program firms within the US and China had made it among the many greatest performing and quickest rising hedge funds on this planet, recording tens of billions of {dollars} in income.
Nevertheless, Russia’s invasion of Ukraine, together with surging inflation and a hawkish Federal Reserve, caught the fund unprepared.
“This time, nonetheless, we didn’t respect how distinctive the circumstances had been that enabled inflation to rise and persist,” the agency stated, admitting it was overexposed to extra unstable monetary markets.
Tiger couldn’t instantly be reached for remark.
The losses have chipped into Tiger’s enviable report. Its flagship fund, launched in 2001, has now recorded internet annual returns beneath 15 per cent, whereas the long-only fund launched in 2013 has returned an annual common of lower than 4 per cent.
The agency’s sprawling portfolio of personal investments continues to melt the blow of losses from its holdings in liquid public markets.
A so-called “crossover” technique fund, which blends Tiger’s publicly traded and privately held investments, shed practically 37 per cent on a internet foundation within the first half of 2022.
The agency marked down its portfolio of personal holdings additional within the second quarter regardless of what it characterised as sufficient money positions and “constructive working efficiency total”.
Although Tiger admitted to misjudging the volatility that has come this yr, it informed buyers it will keep the identical strategy it has held because it was based by Coleman within the wake of the dotcom bust. He began Tiger International after working underneath hedge fund billionaire Julian Robertson, who closed his Tiger Administration in 2000.
“[W]e consider the identical strategy we utilized in these first 20 years — with enhancements and extra perspective from new battle scars — will get better losses and generate the long-term, superior efficiency that’s our mission and expectation,” the investor letter stated.
The agency has been trimming holdings in teams by which it has “low conviction”, it stated, and growing its positions in companies it deems “one of the best firms at attention-grabbing costs”.