Tiger Global blames inflation after flagship hedge fund drops 50%
Chase Coleman’s hedge fund Tiger Global ended the second quarter with heavy losses amid a rout in tech stocks that dragged down the performance of one of the world’s largest hedge funds.
A long-only fund the company manages ended the second quarter down 63.6% after fees, according to a letter sent to investors seen by the Financial Times, while the company’s flagship fund ended the first half down 50% after expenses. .
“Looking back on the first half of the year, it’s clear that we underestimated the impact of rising global inflation and entered 2022 with too much exposure,” the company said. investors.
Tiger Global said it had in the past dismissed inflation fears because it believed the era of technological change was “deflationary”, a maneuver that worked during the post-crisis equity bull market.
Over the past decade, the hedge fund’s heavy exposure to technology and software companies in the United States and China had made it one of the best-performing and fastest-growing hedge funds in the world, recording tens of billions of dollars in profits.
However, Russia’s invasion of Ukraine, along with rising inflation and a hawkish Federal Reserve, caught the fund off guard.
“This time, however, we did not appreciate how unique the circumstances were that allowed inflation to rise and persist,” the company said, admitting it was overexposed to higher financial markets. volatile.
Tiger could not immediately be reached for comment.
The losses have contributed to Tiger’s enviable record. Its flagship fund, launched in 2001, has now posted net annual returns of less than 15%, while the long-only fund launched in 2013 has returned an annual average of less than 4%.
The firm’s sprawling portfolio of private investments continued to cushion the blow from losses to its liquid public markets holdings.
A “crossover” strategy fund, which mixes public and private Tiger investments, lost nearly 37% on a net basis in the first half of 2022.
The company further reduced its private equity portfolio in the second quarter despite what it said were adequate cash positions and “positive operating performance overall.”
Tiger said his short portfolio had been profitable for the year and he was picking his places in China carefully amid high regulatory risk and Covid shutdowns.
Although Tiger admitted to misjudging market volatility this year, he told investors he would maintain the same approach he has taken since being founded by Coleman following the dotcom meltdown. Coleman started Tiger Global after working under hedge fund billionaire Julian Robertson, who shut down Tiger Management in 2000.
“[W]We believe that the same approach we have applied in these first 20 years – with improvements and the added prospect of new battle scars – will recoup losses and generate the superior long-term performance that is our mission and our expectations.” , says the letter to investors.
The company has reduced its holdings in groups in which it has “low conviction”, it said, and increased its positions in companies it considers “the best companies at attractive prices”.