Q1 of 2021 proved to be a challenging quarter for high-growth names and for retail and institutional investors alike. During that period, the Nasdaq 100 momentarily entered a bear market, plagued by inverted yield curve and interest rate fears, as well as the implications of the Russia-Ukraine war. However, March proved to be a strong month for the index, and it closed the quarter with a 10 percent YTD decline, although several Tiger Cubs incurred even greater losses.
For context, hedge funds in aggregate posted an average return of 1.5% during March. The top 10% of hedge funds posted an average return of 24.3% during Q1, while the bottom ten 10% returned an average of loss of 15.4%, according to HFR.
Tiger Global
Chase Coleman’s Tiger Global had one of its worst quarters of all time, posting a Q1 loss of 33.7%. In a letter to investors, the hedge fund stated:
“In this moment, we are humbled, but steady in our conviction and confident about the go-forward opportunity. We are reassessing and refining our models using all the inputs available to us.”
“In hindsight, we should have sold more shares across our portfolio in 2021 than we did.”
The fund’s largest position, JD, fell by 15% during Q1. Tiger Global first invested in the Chinese e-commerce company in 2009, which has created a $5 billion net profit over time. Meanwhile, the fund’s third largest position, Sea Limited, plummeted by 46%.
Uneasy international relations between the U.S. and China have sent Chinese stocks listed on U.S. exchanges plummeting for the past year due to delisting fears. The U.S. regulatory provision that has the power to do this, called the Holding Foreign Companies Accountable Act (HFCAA), states that Chinese companies listed on U.S. exchanges must submit audited filings to U.S. regulators. Failure to do this for 3 consecutive years will lead to a potential delisting. Companies currently on the HFCAA list include Baidu, iQIYI, and Weibo.
China has made it clear that it’s not favor of the HFCAA, as sharing these audited filings could lead to a leak in “sensitive data.” However, the China Securities Regulatory Commission (CSRC) recently announced that it is in the process of creating a framework to adhere to the demands of the HFCAA. The CSRC also admitted that it is prepared to “accept that some state-owned and private companies that hold sensitive data will be delisted.”
Here are Tiger Global’s holdings as of Q4:
The fund is currently on track for its second consecutive yearly loss in a row. Since 2007, Tiger Global has only posted 3 yearly losses compared to 12 yearly gains. The fund has averaged an annual return of around 20% since its inception, outperforming the market by a wide margin.
Tiger Global had private investments of $65 billion as of the end of 2021. The recent shareholder letter stated that the firm “adjusted valuations down” in order to factor in declines in the stock market. Additionally, the firm owns private investments in companies such as ByteDance, Stripe, and Databricks.
However, Tiger Global wasn’t the only Tiger Cub to have a rough Q1. In fact, several Tiger Cubs suffered large losses during the quarter.
Bob Bishop and Commodities
Besides Tiger Global, D1 Capital suffered a 16.4% loss, while Coatue barely missed out on double-digit losses with a 9.9% loss. On top of that, two other Tiger Cubs posted negative returns, although their returns aren’t accurate as of the end of Q1:
Maverick Capital - Lee Ainslie: -9.8% (As of Feb. 2022)
Lone Pine - Steve Mandel: -10% (As of Jan. 2022).
Meanwhile, Impala, which has a commodity-heavy portfolio, shined on top with 27.5% and 11% returns in two of its funds. Bob Bishop of Impala has chosen to take a non-tech approach in his portfolio, unlike his Tiger Cub peers, which was worked spectacularly this year. In addition, the fund returned a staggering 55.5% last year, making it the second best performing hedge fund of 2021.
Here are Impala’s top 25 positions as of Q4:
Tiger Cubs Tend to Hold Similar Stocks
When you compare a list of technology holdings between the Tiger Cubs, it becomes clear that the hedge funds tend to hold similar positions. This can help explain why so many of them have posted negative returns during the past quarter. Several common companies that have experienced massive declines from their peaks include Peloton, Shopify, Zoom, Pinterest, and Carvana.
It will be interesting to see whether the Tiger Cubs stick with their technology-focused portfolios or rotate into other sectors. The deadline for institutional investors to file a Q1 13F is May 16th, so institutional portfolio holdings as of Q1 will soon be revealed.
Coatue Management
Philippe Laffont’s Coatue Management was badly hurt by its largest position, Rivian. The electric vehicle (EV) manufacturer accounts for 16.26% of Coatue’s portfolio and posted a Q1 return of -51%. Rivian announced last month that it had lowered its 2022 production estimate to 25,000 vehicles, down from 50,000 vehicles. The news sent RIVN stock lower in response. As of March, the company has 83,000 preorders for its R1T and R1S models.
Coatue invested privately in Rivian before the IPO, along with Third Point, Dragoneer, and Fidelity Management, among others.
Hedge Vision - Institutional Insights
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