Tiger Global Management’s brutal 12 months is getting even harder, with losses on the agency’s high-profile hedge fund ballooning to 52% by way of May.
Tiger
reported the drop, which extends a 44% loss recorded by way of April, in a word to its buyers Thursday. The agency’s long-only fund misplaced 20.6% in May, bringing its losses for the 12 months to 61.7%. The losses prompted Tiger to chop its administration price by 0.5% by way of December 2023 in each its hedge fund and long-only fund.
Tiger additionally stated that beginning in June, it might pay out buyers exiting from these funds with each money and shares in a brand new aspect pocket it might create containing stakes in non-public firms that may be paid out as these investments are realized. Tiger, which manages about $75 billion throughout its public and private-equity funds, stated the worth of its non-public investments had turn out to be a far bigger proportion of its funds as its portfolio of public shares continued to lose cash.
“Our team remains maximally motivated to earn back recent losses,” the agency wrote within the letter, which was earlier reported on by Bloomberg News.
The selloff in progress shares since November has punished Tiger and different beforehand top-performing hedge funds, together with different so-called Tiger Cubs, whose founders educated beneath famed investor
Julian Robertson.
Many hedge funds investing in each private and non-private firms ramped up their reliance on non-public bets final 12 months, at what turned out to be the highest of the market. The losses have erased years of positive factors and put a query mark over what had been one of many trade’s top-performing methods.
The selloff has contributed to the demise of 1 distinguished hedge fund: Melvin Capital Management, which had already been battered by the meme-stock rally in 2021. Melvin founder
Gabe Plotkin
in May shocked shoppers by telling them he deliberate to close down his stock-picking fund and provides shoppers their a refund. Melvin invested solely in public firms.
Managers, buyers and advisers to so-called crossover funds, which make each private and non-private investments, have stated funds at present are structured extra soundly than they have been within the run-up to the monetary disaster, when illiquid investments usually have been commingled with liquid wagers in the identical fund. Clients who have been anticipating to obtain money again in a well timed method after placing in redemption requests typically waited years.
But the selloff has uncovered vulnerabilities that have been glossed over when progress and know-how shares have been gaining. Coatue Management LLC earlier this 12 months informed shoppers it might be side-pocketing non-public investments and paying out redeeming buyers solely partly with money.
Tiger’s hedge fund now will acquire a 1% administration price, stated an individual aware of the agency. The agency has a modified high-water mark in place for its hedge fund, permitting it to gather an incentive price of 10% on funding positive factors even when shoppers haven’t been made complete from broader losses at Tiger. Managers say such preparations assist encourage and retain funding groups by holding out the potential of massive paydays. To make shoppers who have been invested initially of 2022 complete, Tiger would wish to make greater than 100%. Tiger collects its full 20% incentive price in its hedge fund when shoppers have been greater than made complete, the particular person acquainted stated.
The agency additionally informed shoppers they might withdraw as much as a 3rd of their funding in its public funds this 12 months, in contrast with 1 / 4 repeatedly for the hedge fund and a fifth for the long-only fund.
Write to Juliet Chung at [email protected]
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