Tiger Global blames inflation after leading hedge fund plunges 50%.

Tiger Global blames inflation after leading hedge fund plunges 50%.

Chase Coleman’s Tiger Global hedge fund ended the second quarter nursing big losses amid a slide in tech stocks that undercut the performance of one of the world’s largest hedge funds.

The long-standing fund managed by the firm ended the second quarter down 63.6 percent after fees, according to a letter sent to investors by the Financial Times, while the company’s flagship fund ended the first half of the year down 50 percent after fees.

“When reflecting on the first half of the year, it is clear that we underestimated the impact of rising global inflation and entered 2022 with too much exposure,” the company told investors.

Tiger Global said he had dismissed fears of inflation in the past because he believed the era of technological change was “deflationary,” a maneuver that saw through the post-crisis bull market in stocks.

Over the past decade, the hedge fund’s heavy exposure to technology and software companies in the US and China has led to among the most successful and fastest growing hedge funds in the world, which record tens of billions of dollars in profits.

However, Russia’s invasion of Ukraine, along with rising inflation and a strong Federal Reserve, caught the fund off guard.

“This time, however, we didn’t realize how unique the circumstances were that allowed inflation to rise and persist,” the firm said, admitting it was overexposed to more volatile financial markets.

Tiger was not immediately available for comment.

The losses dented Tiger’s enviable record. Its flagship fund, launched in 2001, has now recorded a net annual return of under 15 per cent, while only the long-term fund launched in 2013 has returned an annual average of less than 4 per cent.

The company’s broad portfolio of private investments continued to cushion the blow of losses from its holdings in liquid public markets.

The crossover strategy fund, which combines Tiger’s public and private investments, fell nearly 37 percent on a net basis in the first half of 2022.

The company further reduced its portfolio of private holdings in the second quarter despite what it characterized as adequate cash positions and “overall positive operating results.”

Tiger said its short portfolio has been profitable for the year and it is picking its spots carefully in China amid high regulatory risk and the Covid shutdown.

While Tiger admitted it had misjudged market volatility this year, it told investors it would maintain the same approach it had since it was founded by Coleman after the dotcom bust. Coleman started Tiger Global after working for hedge fund billionaire Julian Robertson, who closed Tiger Management in 2000.

“[W]We believe the same approach we took in those first 20 years – with improvements and added perspective from new battle scars – will offset the losses and create the long-term, superior performance that is our mission and expectation,” the investor’s letter said.

The firm has been reducing stakes in groups in which it has “low confidence”, it said, and increasing its positions in businesses it considers “the best companies at interesting prices”.

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