Tiger suffers one of the biggest hedge fund pullouts in history

Yeah. Tiger Global got smoked again last month. Kudos to Bloomberg for getting the scoopbut here is the The history of FT:

Tiger Global’s flagship hedge fund took another hit in April and is now down more than 40% this year, the latest sign of how star investors who participated in the big rally in tech stocks have been caught out. counterbalanced by a brutal recoil.

The losses mark a dramatic fall from grace for Tiger Global founder Chase Coleman, who became one of the world’s most prominent growth investors after founding the company in 2001.

Tiger Global’s hedge fund lost 15.2% in April, according to a person familiar with the matter, sending it down 43.7% in the first four months of 2022. This year’s losses and a 7% reversal in 2021 means the Tiger Global hedge fund’s 48% gain in 2020 has been completely wiped out.

The group’s long-only fund lost 24.9% in April and is down 51.7% in 2022, the person said. Together, across the two funds, the company was managing approximately $35 billion in public equity at the end of 2021.

A 44% loss in four months is epic. The loss of 52% of its long-only equity portfolio is ARKK Territory. (Editor’s note: ARKK is actually “only” down 47.2% this year).

Back-of-the-envelope calculations based on the reported $35 billion size of Tiger’s overall public equity portfolio at the end of last year indicate that it likely suffered a nominal loss of at least 15 billion dollars in 2022.

One to five hard yards.

To put that into perspective, Citadel lost 55% to an estimated $8 billion loss during the 2008 financial crisis, which led CNBC to camp a van outside its Chicago headquarters and nearly kill it. In nominal terms, this has to be at or near the top of the biggest hedge fund outflows in history?

Given that there were 82 trading days in January-April, that’s a loss of about $183 million each day that markets open this year. Or 28.1 million dollars per hour of opening of the American markets. It’s almost impressive.

Here is the letter Chase Coleman and his team sent to investors yesterday, which the FT picked up.

Dear investor,

The month of April added to a very disappointing start to the year 2022 for our public funds. Markets have not been cooperative given the macro backdrop, but we don’t believe in excuses and therefore won’t offer any. We continue to manage the portfolio as described in our Q1 letter. We have confidence in our team, our process and our portfolio and know that we will see this as part of a long journey and that we will benefit from the process improvements that we continue to make as a company. We are here to answer your questions, remain committed to recovering our losses, and intend to be as transparent and communicative as possible during this difficult time.

We appreciate your commitment and trust.

Sincerely,

Tiger’s global investment team.

Griffin survived his annus horribilis and turned Citadel into one of the biggest and worst hedge funds of the lot, making virtual friends along the way. Coleman is also, by most accounts, a pretty brilliant investor, and maybe that will end up being another takeover story in the years to come.

But the reality is that these kinds of losses are hard to recover, due to the economics of the hedge fund industry.

Hedge funds charge significant performance fees in addition to annual management fees. While the latter are not to be sniffed at, often being twice as large as what boring mutual funds charge, it is performance fees that have helped make some hedge funders the wealthiest people in the world. the planet.

To ensure that hedge fund managers aren’t just making tons of money in good years and rigid investors in lean years, most have “high waters” that the fund must overcome to generate profits. performance fees. It could be tough for Tiger now, as a former hedge fund manager and full-time peacock Mike Novogratz noted on Twitter.

The problem is that when you can’t collect those performance fees, it becomes much harder to retain your best people. They might be tempted to go out to open their own shop or join a competitor rather than working for years to get back to the high water mark.

That was the problem Gabe Plotkin of Melvin Capital tried to solve when he said last month that his hedge fund would kick investors out of his fund before letting them reinvest in a new one. This would allow it to start charging performance fees again despite still being heavily underwater from the GameStop saga last year. It went like a cup of cold, forcing Plotkin into an awkward situation go back.

Ted Seides of Capital Allocators wrote an EXCELLENT summary of the saga and wider issues.

Going back to Tiger, it doesn’t seem to be a problem with leverage and forced liquidations, just longs that are absolutely hammered and shorts that can’t offset that. Money from his biggest private market wallets is blocked, which will help Tiger through the pain.

But he badly needs the growth tech stocks he’s piled into to pick up soon, or things will go downhill fast. The problem is that even some top technologists think things can get worse before they get better.

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