The pain continued in May for Tiger Global Management. The hedge fund giant is losing money at a rate of over $130 million a day and most of its capital is gone.
From a Bloomberg report that broke this morning:
Losses at Tiger Global Management reached 52% this year, prompting the firm to cut management fees and create separate accounts for the illiquid wagers of customers who want to redeem.
The firm’s hedge fund sank 14.2% last month, buffeted by losses in several stocks and substantial markdowns in its private assets, according to an investor letter seen by Bloomberg and a person with knowledge of the matter.
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This comes after massive losses in April:
By April, the hedge fund’s 44% tumble, along with losses in its long-only and crossover funds, wiped out about $16 billion.
These figures put Tiger’s capital at the beginning of 2022 at around $36 billion. After April’s loss, a further 14% slide in May represents a $2.9 billion wipeout for the month.
May’s losses came to about $136 million per trading day. Every day.
As colossal as these losses are, they may be an underestimate of the true damage. Tiger has taken markdowns on its shares in private tech startups, but we have no way of knowing if those markdowns reflect reality.
Another large late stage investor, Fidelity, has taken only minor markdowns on its portfolio, including a 13% haircut on Stripe. Block, a similar fintech giant that happens to be publicly traded, is down 70% from its August high.
Tiger too may be engaging in this sort of wishful thinking.
If that wasn’t bad enough, Tiger may soon face attack from other hedge funds. It has allowed investors to pull out more money than usual, which will require huge stock sales.
Other funds are likely to short Tiger’s positions, knowing that Tiger has to sell regardless of price. This could make Tiger’s losses even worse.
So what’s next for Tiger? Their high-water mark means that until the fund recoups all its losses and a lot more, fees will be minimal.
Those fees pay the fat bonuses hedge funders are used to. Without them, many employees may jump ship.
Indeed, Tiger could shut down completely, daunted by the need to more than double their fund just to get back in the black. Melvin Capital Management recently closed after facing a long future with no juicy performance fees.
I expect to see Tiger’s losses grow as other funds attack its positions. However, a sudden, major run-up in tech stocks could save them at the last minute.
One thing I do know: I’m glad I don’t have any money in Tiger.
What do you think lies ahead for Tiger? And what hedge fund will be next?
Leave a comment at the bottom and let me know!
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Photo: Tiger Global CEO Chase Coleman