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Tiger International blames inflation after 50% drop in flagship hedge fund

Chase Coleman’s hedge fund Tiger International ended the second quarter nursing heavy losses amid a tech inventory rout that has brought about efficiency throughout one of many world’s largest hedge funds to plummet.

A protracted-only fund the agency manages ended the second quarter down 63.6 per cent after charges, based on a letter despatched to buyers seen by the Monetary Occasions, whereas the agency’s flagship fund ended the primary half of the 12 months down 50 per cent after charges.

“In reflection on the primary half of the 12 months, it’s clear we underestimated the affect of rising international inflation and entered 2022 with an excessive amount of publicity,” the agency instructed buyers.

Tiger International mentioned 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 way of the post-crisis bull market in shares.

Over the previous decade, the hedge fund’s heavy publicity to know-how and software program corporations 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.

Nonetheless, Russia’s invasion of Ukraine, together with surging inflation and a hawkish Federal Reserve, caught the fund unprepared.

“This time, nevertheless, we didn’t admire how distinctive the circumstances had been that enabled inflation to rise and persist,” the agency mentioned, admitting it was overexposed to extra risky 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 web annual returns under 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 continued to melt the blow of losses from its holdings in liquid public markets.

A “crossover” technique fund, which blends Tiger’s publicly traded and privately held investments, shed almost 37 per cent on a web 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 satisfactory money positions and “optimistic working efficiency general”.

Tiger mentioned its brief portfolio had been worthwhile for the 12 months, and that it was selecting its spots rigorously in China amid excessive regulatory danger and Covid shutdowns.

Although Tiger admitted to misjudging market volatility this 12 months, it instructed buyers it might preserve the identical strategy it has held because it was based by Coleman within the wake of the dotcom bust. Coleman began Tiger International after working underneath hedge fund billionaire Julian Robertson, who closed 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 well losses and generate the long-term, superior efficiency that’s our mission and expectation,” the investor letter mentioned.

The agency has been trimming holdings in teams by which it has “low conviction”, it mentioned, and rising its positions in companies it deems “the very best corporations at fascinating costs”.

Video: The way it all turned bitter for Tiger International | FT Large Deal

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