Tiger Global Management’s tough year has turned even tougher, with losses at the company’s high-profile hedge fund skyrocketing to 52% through the end of May.
Tiger reported a decline, extending its 44% loss on record through April, in a note to its investors on Thursday. The company’s sole long-term fund lost 20.6% in May, bringing its loss for the year to 61.7%. The loss prompted Tiger to cut management fees by 0.5% through December 2023 in both hedge funds and long-term funds.
Tiger also said that starting June, it will pay investors withdrawing from those funds with both cash and stock in a new side pocket it will create containing shares in companies. private sector will be paid when those investments are made. Tiger, which manages about $75 billion in public and private equity funds, says the value of their private investments has become a much larger share of their funds as their equity portfolios. Their masses continue to lose money.
“Our team remains maximally motivated to recoup recent losses,” the company wrote in the letter, previously reported by Bloomberg News.
The sell-off in growth stocks since November has punished Tiger and other previously performing hedge funds, including other so-called Tiger Cubs, whose founders trained under investors. famous Julian Robertson. Many hedge funds that invest in both public and private companies increased their reliance on private betting last year, at the top of the market. The losses wiped out years of gains and called into question what was once one of the industry’s best performing strategies.
The sell-off contributed to the demise of a popular hedge fund: Melvin Capital Management, which was beaten by a meme stock rally in 2021. Melvin founder Gabe Plotkin in May prompted The client was surprised when he told them that he planned to close his stock- choose the fund and return the money to the client. Melvin only invests in public companies.
Managers, investors and advisers of so-called cross-funds, which make both public and private investments, have said that funds are more structured today than they were before the financial crisis. main, when illiquid investments are often accompanied by liquid betting. in the same fund. Customers who expect a timely cash back after making a redemption request sometimes have to wait years.
But the sell-off has exposed holes that have been covered up as growth and tech stocks are rising. Earlier this year, Coatue Management LLC told clients it would pocket private investments and only pay investors for partial cash buybacks.
A person familiar with the company said Tiger’s hedge fund will now charge a 1% management fee. The company modified a high water mark for its hedge fund, allowing it to charge an incentive fee of 10% on investment returns even if clients do not take full blows from larger losses at Tiger. Such arrangements help to motivate and retain investment teams by capturing the potential of big paydays, managers say. To generate all of its invested clients by early 2022, Tiger will need to earn more than 100%. Tiger collects a full 20% incentive fee into its hedge fund when clients are full, a person familiar with the matter said.
The company also told clients it could withdraw up to a third of its public fund investments this year, compared with a regular quarter for hedge funds and a fifth for long-term funds. term.
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Appeared 3rd June 2022, print edition titled ‘Tiger hedge fund losses increase to 52%.’
https://www.wsj.com/articles/tiger-global-s-hedge-fund-lost-52-for-the-year-through-may-11654190073?mod=pls_whats_news_us_business_f Tiger Global’s Hedge Fund Lost 52% for the Year Through May