a hedge fund in trouble with the ‘tech’

The victims of bear market on the nasdaq They begin to surface as the calendar progresses. Funds as recognized as the ARK Innovation ETF, managed by the famous Cathie Wood, have plummeted more than 70% from their historical highs due to their high linkage to companies in the technology sector whose valuations had always been in question. But it is not the only damaged vehicle. From honey to mud. This year’s brutal sell-off has dealt a heavy blow to some hedge funds. Melvin Capital Managementthe fund burned by the GameStop furor, said last month it will withdraw its funds and return liquidity to investors as losses accelerate.

And it does not stop there, only, Another of the funds that has suffered a major crash in the markets as a result of its exposure to technology is the legendary ‘hedge fund’ TigerGlobalfounded in 2001 by julian robertson and that it has given birth to a litter of fund managers who have become Wall Street stars. The fund has lost more than 50% so far in 2022, after seeing a 14.2% decline in May alone, according to a report in Fortune.

Tiger communicated that his ‘hedge fund’, which managed more than 23,000 million dollars at the end of 2021, It fell 52% this year. That’s probably one of the biggest losses in hedge fund history. Its other vehicle, a fund of ‘large caps’ with assets under management worth 11,000 million dollars at the end of last year, has lost 61.7%.

The maker of ‘unicorns’

The manager took advantage of technological growth like no one else. She was financing more startups than any other US private equity when the market peaked last year, and it had tens of billions of dollars of pensions, endowments and contributions from retail and institutional investors.

With the fall of technological values, your situation has taken a disastrous turn. The capitulation of the market has evaporated years of success in a matter of months, putting in doubt the great bets of Tiger. The aforementioned report cites a letter from an investor revealing that the flagship fund he runs Chase Coleman increased his positions in several technology stocks, including Snowflake, Carvana and Seaearly in the fourth quarter, before the selloff in Nasdaq-listed stocks accelerated.

To put in context those poor results of those participations: caravan has plummeted 77% in the second quarter so far, while Snowflake is down 44% and Sea is down over 30% this quarter. Similarly, Tiger Global attempted to stem losses in May by liquidating positions in AirBnB, Bumble, Netflix and Peloton. However, the bleeding has continued. “Our recent performance is deeply frustrating, although our business is configured with the duration to weather the storms when they arise, ”said the hedge fund in a letter to its investors.

Powell's flight, stock market shock and the dismantling of a house of cards in debt.

From the sky to the ground

The technology industry, especially unprofitable companies and highly valued software companies, have been hit hard lately by rising interest rates. Those strong setbacks of technology companies have caused the Nasdaq to fall more than 23% so far this year and 26% less than its all-time high.

Meanwhile, the venture capital funds of Tiger brace for a slowdown in the tech start-up sector. As firms move from rapid progress to layoffs and preservation of capital, writedowns of partnership funds, valued at $64 billion in 2021, have begun and are apparently going higher. Big venture capital firms are warning of tough times.

The cheap liquidity transformed Silicon Valley over the past decade, as pension funds, operators with more liquid positions and the most famous investors turned to managers to increase their capital quickly. As stocks rallied during the pandemic, tech fund upsides attracted more investors to the sector, while valuations far exceeded historical norms.

Tiger stood out against the bullish frenzy of big tech. His venture capital firm in March raised funds worth $12.7 billion, one of the largest in the industry. The fund invested a total of 361 financing rounds in 2021, compared to 16 in all of 2017. Now its portfolio is being diluted like sugar in the coffee.

.

Leave a Reply

Your email address will not be published.