Tag Archives: NASDAQ

Business, Technology

Tiger Global Down 52% — Losses Over $18 Billion

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Note: This is not financial advice.

Hedge fund giant Tiger Global Management has lost the majority of its capital in 2022. From a new Bloomberg report:

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Tiger Global Management and Whale Rock Capital Management were among stock-picking hedge funds to report September losses as equity markets tumbled.  

Chase Coleman’s Tiger Global fell 4.4% for the month, extending its decline for the year to 52%, according to people familiar with the matter who asked not to be identified discussing the results. The New York based firm’s long-only fund tumbled 9.6% in September to bring its year-to-date slide to 66.5%.

Tiger managed about $35 billion at the beginning of the year, putting its losses at over $18 billion.

Those losses could be far larger when Tiger’s startup investments are taken into account. Those bets on opaque private companies are hard to value.

What we do know is that tech startup valuations are down. This is especially true for the late stage companies Tiger favors, which closely track the public markets.

With losses like this, a brutal math sets in.

Tiger must more than double its capital just to get back where it was at the beginning of the year. Worse yet, it’s long-only fund has to triple!

That’s incredibly hard to do.

But until Tiger wins back its losses, it won’t be able to charge performance fees. These juicy 20% fees are the lifeblood of hedge funds.

Without those fees, bonuses will be slim to nonexistent.

The top performers will leave for greener pastures. Those that stay are likely to be demoralized.

I suspect Tiger will close the long-only fund, and perhaps the entire business. After all, starting fresh is an opportunity to earn juicy fees again.

Tiger’s abysmal performance trails many index funds with much lower fees.

I own Vanguard 500 Index Fund Admiral Shares, which are down just 23% this year. They have an expense ratio of 0.04% and no performance fee.

Tiger’s investors would do well to ditch the expensive and poorly performing fund and give Vanguard a call.

Do you think Tiger will survive? Leave a comment at the bottom and let me know!

More on markets:

Hedge Fund Giant Tiger Loses Over $18 Billion — Long Fund Down 64%

New Report: Millions of Fails to Deliver in AMC and APE Shares

Q3 Venture Funding Slows to a Crawl

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Photo: Tiger Global CEO Chase Coleman

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Business, Technology

Hedge Fund Giant Tiger Loses Over $18 Billion — Long Fund Down 64%

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Note: This is not financial advice.

Hedge fund colossus Tiger Global Management is fighting for its life. Its public stock funds have lost between 50 and 64% this year, vaporizing billions.

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From a report that broke last night in the Financial Times:

Chase Coleman’s hedge fund Tiger Global ended the second quarter nursing heavy losses amid a tech stock rout that has caused performance across one of the world’s largest hedge funds to plummet.

A long-only fund the firm manages ended the second quarter down 63.6 per cent after fees, according to a letter sent to investors seen by the Financial Times, while the firm’s flagship fund ended the first half of the year down 50 per cent after fees.

Tiger’s public stock funds managed $35 billion at the end of last year, per the Financial Times.

This puts the firm’s losses in stocks for the year at a bare minimum of $18 billion. Those losses could be much larger depending on the relative size of the flagship and long-only funds, which is not publicly reported.

This comes in addition to massive losses in private tech startup shares:

A “crossover” strategy fund, which blends Tiger’s publicly traded and privately held investments, shed nearly 37 per cent on a net basis in the first half of 2022.

After huge losses like this, the brutal math sets in. Hedge funds have to make back all of their losses before they can start charging performance fees again.

Hedge funds generally charge a 2% management fee and take 20% of all investment gains. That 20% performance fee is how hedge fund billionaires are made.

Without those juicy fees, it’s hard to keep talent.

Tiger’s long-only fund will have to triple before it can charge a performance fee again. Even if it posts solid 10% annual returns, that will take 11 years.

Even the flagship fund has to double its capital before those fat fees kick in. How many aspiring masters of the universe want to wait that long?

Worse yet, Tiger has cut its management fee to just 1% through December 2023. It also cut its performance fee to just 10% until it not merely makes up all its losses but posts significant gains.

This lack of fees will make it hard to get and keep good people. Why not just jump ship to a fund that isn’t so far underwater, or start your own?

I expect Tiger will close the long-only fund. It’s just too far gone.

As for the flagship fund, perhaps they’ll fight their way back to even with a skeleton crew. I wish them luck — it won’t be easy.

Tiger’s massive losses show the risk of heavily concentrated bets. Going all-in on a single sector with a small number of stocks can result in disaster.

Tiger’s investors would’ve done better to buy a low-fee index fund like the Vanguard ones I own. It’s hard to outsmart the market.

What do you think the future holds for Tiger and other hedge funds? Leave a comment at the bottom and let me know!

More on markets:

AMC’s 9 Million Missing Shares

Wall Street Banks Turn on Each Other as Federal Probe Looms

Investors Pull $28 Billion from Hedge Funds

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Business, Technology

Hedge Fund Tiger Global Losing $136 Million a Day, Down 52%

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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!

More on markets:

Hedge Fund Giant Tiger Global Losing $28 Million an Hour

$6B Hedge Fund Cut Off from Trading As Investigation Looms

Citadel Adds Millions to AMC Options Bet

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Photo: Tiger Global CEO Chase Coleman

Business, Technology

Why Tech Stocks Are Oversold

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It’s no secret that tech stocks have gotten kicked in the face in the last 6 months. The NASDAQ index of tech stocks is down 26% since November:

I’m convinced that public tech stocks are oversold right now. That’s been my gut feeling for at least a month, but today I came across some fascinating statistics.

Sequoia Capital, the best venture capital firm in history, released some stunning figures in a recent presentation to its founders:

– “61% of all software, internet and fintech companies are trading below pre-pandemic 2020 prices”

– “That’s despite many of these companies more than doubling both revenue and profitability”

– “⅓ are trading below COVID lows, when uncertainty and fear was peaking”

“- Growth-adjusted multiples [valuation divided by revenue] have fallen even further and are well below the 10-year average and pushing the 10-year lows”

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If a company doubles its revenue and profits but actually trades for less money than before, that is a bargain! If you liked it at $100 a share and $10 a share in earnings, for example, you have to love it at $75 a share and $20 in earnings!

But what about interest rates?

The NASDAQ is actually cheaper now than it was when the federal funds rate hit its recent peak in July 2019. At that time, the NASDAQ had a PE ratio of around 30 with the federal funds rate at 2.4%.

The current federal funds rate is a paltry 0.33%. Even if you look at rate expectations, they’re only around 2.8%.

Meanwhile, today’s NASDAQ PE is just 22.

And don’t forget, the Fed may not raise rates as much as expected.

Companies are laying off workers, the economy is on the edge of recession, a war is raging in Europe and COVID may return in the fall. There are many potential reasons why the Fed could back off.

Could tech stocks fall further? Absolutely.

But with every company and household pulling back at once, I think inflation will begin to moderate soon. And if it does, the Fed has a lot less reason to raise rates further, putting more pressure on tech stocks.

Fundamentally, here’s the question you have to ask yourself:

“Do I think the value of technology companies will be greater in 20 years or less in 20 years? Will they have more innovative products and paying customers, or fewer?”

The answer is obvious. Technology has transformed every industry and will continue to do so, resulting in massive profits.

And I want to be there when it happens.

What do you think is ahead for tech stocks? Leave a comment at the bottom and let me know!

More on markets:

Hedge Fund Giant Tiger Global Losing $28 Million an Hour

$6B Hedge Fund Cut Off from Trading As Investigation Looms

Credit Suisse May Need Up to $1 Billion After Huge Losses

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Business, Technology

Hedge Fund Giant Tiger Global Losing $28 Million an Hour

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Massive hedge fund Tiger Global Management is down nearly 50% so far this year, according to a new report from the Financial Times:

Tiger Global’s flagship hedge fund was dealt a fresh blow in April and is down more than 40 per cent this year, in the latest sign of how star investors who rode the big rally in tech stocks have been wrongfooted by a sharp pullback.

Tiger Global’s hedge fund lost 15.2 per cent in April, according to a person familiar with the matter, taking it down 43.7 per cent in the first four months of 2022. This year’s losses and a 7 per cent reversal in 2021 mean that the Tiger Global hedge fund’s gain of 48 per cent in 2020 has been completely erased.

The group’s long-only fund lost 24.9 per cent in April and is down 51.7 per cent in 2022, the person said. Across the two funds, the firm managed about $35bn in public equities at the end of 2021.

The losses are some of the biggest in the history of hedge funds:

Back of the envelope calculations based on the reported $35bn size of Tiger’s overall public equities book at the end of last year indicate that it has probably suffered a nominal loss of at least $15bn in 2022.

Given that there were 82 trading days in January-April, this works out to be a loss of roughly $183mn every day that markets were open this year. Or $28.1mn every hour that US markets were open.

Tiger has been torched by plummeting tech stocks. Its short positions have failed to make up the difference.

I predicted a meltdown at Tiger Global on this blog on February 7th. It took less than 3 months.

Two things happen when a hedge fund drops by half: people assume it can go down all the way, and top employees start leaving.

After all, they could soon be out of a job anyway. Even if not, hedge funds can’t charge that juicy 20% performance fee until they make back all their losses.

This means no big bonuses for a long, long time.

Tiger’s problems are compounded by major stakes in many tech startups. The hedge fund roiled the venture capital world by putting huge sums at eyewatering prices into late-stage companies in the last few years.

As an angel investor, I’ve had many deals that Tiger is in cross my desk. I can confirm they tend to invest huge sums (often over $100 million) in startups at staggering valuations.

Tiger is also well known for doing little if any due diligence on these companies. It’s likely that Tiger’s fast-and-loose approach could have led it to invest in many weak or even fraudulent companies.

Tiger’s losses may be much worse than 50% when you account for its startup investments. Valuations of late stage companies like those Tiger invests in are down over 20% from last year.

It’s easy to hide those losses because unlike publicly traded stocks, the price of these privately held shares seldom changes. But sooner or later, the chickens will come home to roost.

Money locked up in startup investments could also cause a liquidity crisis for Tiger. If investors are spooked by losses and ask for their money back, Tiger can’t get back money it invested in startups.

This illiquidity also makes Tiger vulnerable to margin calls. After its huge losses, brokers may demand more collateral.

With big losses in public markets and the rest of its money locked up in private ones, Tiger may not have the cash.

So what’s next for Tiger?

Melvin Capital recently tried to remove it’s “high water mark” so it could start charging performance fees again. Investors balked, and now the fund may shut down.

Tiger, reeling from losses and with no fat performance fees in sight, could shut down too. Or perhaps it will be rescued by a sudden upturn in tech stocks.

But until then, Tiger CEO Chase Coleman must be dealing with some very angry investors.

What do you think will happen to Tiger and other hedge funds suffering from huge losses? Leave a comment at the bottom and let me know.

More on markets:

How Giant Hedge Fund Tiger Global Blows Up

Hedge Funds Pull Back from Tech Amid Big Losses

Hedge Funds Could Lose Nearly Half of Assets Under Proposed SEC Rule

Photo: Tiger Global CEO Chase Coleman

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I wrote a detailed review of Misfits here.

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