Tiger Global blames inflation after top hedge fund drops 50%

Chase Coleman’s Tiger Global hedge fund ended the second quarter with heavy losses amid a trend in tech stocks that plunged the performance of one of the world’s largest hedge funds.

According to a letter to investors published by the Financial Times, the long-standing fund it manages ended the second quarter down 63.6% after fees, while the company’s flagship fund ended the second quarter. 50% discount at the beginning of the year after fees.

“In the light of the first half of the year, we clearly underestimated the impact of rising global inflation and entered 2022 with too much of an impact,” the company told investors.

Tiger Global said it had previously dismissed concerns about inflation because it believed the era of technological change was “deflationary,” a move that has worked during the post-crisis bull market for stocks. .

Over the past decade, hedge fund exposure to technology and software companies in the US and China has made among the best and fastest growing hedge funds in the world, recording tens of billions of dollars in profits.

However, Russia’s invasion of Ukraine, coupled with rising inflation and the hawkish Federal Reserve, catch funds without preparation.

“This time, however, we do not appreciate how exceptional circumstances have caused inflation to increase and persist,” the company said, acknowledging that it was overexposed to financial markets are more volatile.

Tiger could not be immediately reached for comment.

The losses have become Tiger’s enviable record. Its flagship fund, launched in 2001, has now recorded annual net returns of less than 15%, while the new long-term fund launched in 2013 has collected an annual average of less than 4%.

The company’s rich private portfolio continues to soften losses from holding shares in the liquid public market.

A “cross-strategy” fund, which combines Tiger’s publicly traded and privately held investments, fell nearly 37% on a net basis in the first half of 2022.

The company reduced its private portfolio further in the second quarter, although it is characterized by full cash positions and “positive overall business performance”.

Tiger said its short-term portfolio has been profitable for the year and that it is carefully positioning in China amid high regulatory risks and the Covid shutdown.

Although Tiger admitted to misjudging market volatility this year, it told investors it would maintain the same approach it has taken since it was founded by Coleman. after the dotcom bankruptcy. Coleman founded Tiger Global after working with hedge fund billionaire Julian Robertson, who closed Tiger Management in 2000.

“[W]e believe that the same approach we took for the first 20 years – with improvements and additional views from the new battle scars – will recover losses and produce lasting performance, excelling, that is our mission and expectation,” the investor letter said.

The company said it has cut stakes in groups it has “low confidence” and increased its position in businesses it considers “the best at attractive prices”.

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