Your Survival Guy

Preparing your investments and family for when disaster strikes.

Compensation was paid to utilize rankings. Click here to read full disclosure.

Top Hedge Funds Punished by Growth Stock Selloff

By

By FOTOGRIN @ Shutterstock.com

Hedge funds that put investor money in what they must have thought were “never-ending” growth stocks are hurting. The Wall Street Journal’s Juliet Chung reports on the pain being felt by funds like Tiger Global Management and Melvin Capital Management, writing:

Life Comes at You Fast. Slow It Down with My Friday Email. It’s Free.

Tiger Global Management’s brutal year is getting even tougher, with losses at the firm’s high-profile hedge fund ballooning to 52% through May.

Tiger reported the drop, which extends a 44% loss recorded through April, in a note to its investors Thursday. The firm’s long-only fund lost 20.6% in May, bringing its losses for the year to 61.7%. The losses prompted Tiger to cut its management fee by 0.5% through December 2023 in both its hedge fund and long-only fund.

Tiger also said that starting in June, it would pay out investors exiting from those funds with both cash and shares in a new side pocket it would create containing stakes in private companies that would be paid out as those investments are realized. Tiger, which manages about $75 billion across its public and private-equity funds, said the value of its private investments had become a far larger proportion of its funds as its portfolio of public stocks continued to lose money.

“Our team remains maximally motivated to earn back recent losses,” the firm wrote in the letter, which was earlier reported on by Bloomberg News.

The selloff in growth stocks since November has punished Tiger and other previously top-performing hedge funds, including other so-called Tiger Cubs, whose founders trained under famed investor Julian Robertson. Many hedge funds investing in both public and private companies ramped up their reliance on private bets last year, at what turned out to be the top of the market. The losses have erased years of gains and put a question mark over what had been one of the industry’s top-performing strategies.

The selloff has contributed to the demise of one prominent hedge fund: Melvin Capital Management, which had already been battered by the meme-stock rally in 2021. Melvin founder Gabe Plotkin in May surprised clients by telling them he planned to shut down his stock-picking fund and give clients their money back. Melvin invested only in public companies.

Managers, investors and advisers to so-called crossover funds, which make both public and private investments, have said funds today are structured more soundly than they were in the run-up to the financial crisis, when illiquid investments often were commingled with liquid wagers in the same fund. Clients who were expecting to receive cash back in a timely manner after putting in redemption requests sometimes waited years.

But the selloff has exposed vulnerabilities that were glossed over when growth and technology stocks were gaining. Coatue Management LLC earlier this year told clients it would be side-pocketing private investments and paying out redeeming investors only partly with cash.

Action Line: If you need help building an investment plan that relies on dividends and the power of compound interest, let’s talk.

The following two tabs change content below.
My Twitter profileMy Facebook profileMy Instagram profile

E.J. Smith - Your Survival Guy

E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris. Please get in touch with E.J. at ejsmith@yoursurvivalguy.com To sign up for my free monthly Survive & Thrive letter, click here.

Recent Posts from YourSurvivalGuy.com

Locking In a Generational Opportunity in Fixed Income

UPDATE 11.30.23: Have you added fixed income to your portfolio yet? After over a decade of loose monetary policy, some investors have forgotten about the benefits of fixed income in their portfolios. Some younger investors have come into adulthood having never experienced bond yields worth sinking their teeth into. Now they can. Don’t miss a […]

RIP Charlie Munger: Keeping It Simple Never Goes out of Style

You may have read that Charlie Munger, the vice chairman of Berkshire Hathaway, has passed away. Munger was a legend in the world of investing, and was known, as Jason Zweig of The Wall Street Journal explains, “for his straightforward advice to business leaders.” Zweig writes: Business and financial leaders made frequent pilgrimages to Los […]

Explosion in Gun Ownership Creates Difficulties for Progressives

Banning certain forms of gun ownership has become a centerpiece of the progressive political platform. But after radical progressive politicians fomented a crime wave beginning in the summer of 2020, many Americans, even those in left-wing constituencies, began purchasing firearms for protection. The Editorial Board of The Wall Street Journal explains: More than half of […]

It’s California vs. Florida in the Big State Debate

On Thursday, November 30, Fox News and the station’s primetime personality, Sean Hannity, will host a debate between California Governor Gavin Newsom and Florida Governor Ron DeSantis. Isabella Simonetti explains the debate in The Wall Street Journal, writing: They aren’t running against each other. Still, Ron DeSantis and Gavin Newsom will take their fiery feud to Fox News this […]

Shiffrin Brings It Home with World Cup Win at Killington

You have read about the amazing career of competitive skier, Mikaela Shiffrin. Last time she appeared on YourSurvivalGuy.com, she had notched her 87th World Cup win. It was already safe to put Shiffrin in the GOAT category of athletes near Tom Brady, Michael Jordan, and Michael Phelps. No one has ever dominated skiing the way […]

Prepare for Solar Storms in 2024

The sun experiences solar storms in a roughly eleven-year cycle, and according to scientists, that cycle could peak next year. The peak of this cycle, called the “solar maximum,” has the potential to hit the earth with solar storms that can damage satellites and even electronics on the ground. Jonathan Chadwick reports for the Daily […]

Can the Supreme Court Stop Wealth Taxes Before They Start?

You probably haven’t heard of Moore v. United States, a little-known case working its way through the courts that could have major implications for America’s savers and business owners. The case revolves around the government’s power to tax unrealized gains. These are gains on assets that an owner hasn’t locked in yet, and which could […]

Families Can’t Save Enough

American households are the least prepared they’ve been in a decade to cover an unexpected $2,000 expense. That’s a sign that inflation and slow wage growth have hurt the ability of Americans to save. Bloomberg’s Alexandre Tanzi reports: The ability of US households to cover an unexpected $2,000 expense is at the lowest level in […]

Biden’s Inflation Blame Game

First, it was the “Putin price hike,” now Biden is blaming inflation on corporate greed, an old and tired excuse. CNBC reports: President Joe Biden took aim at corporations Monday for charging prices he said were artificially high even though the rate of inflation has slowed and some shipping costs have fallen. “Any corporation that has not brought […]

Are Investors Ready to Pounce?

Investors waiting to pounce? Not buying it. They finally have rates they can sink their teeth into. They’re in no rush to take on more risk. At least, that’s not what they’re telling me. In The Wall Street Journal, Jack Pritcher suggests investors are looking for more risk. He writes: Stocks and bonds have surged […]

Disney Signals Problems with the ESG Agenda

You have read about Disney’s war against Florida Gov. Ron DeSantis and parental rights. Now, it appears that Disney is realizing the error of getting involved in America’s culture wars in order to boost its ESG rankings. Johnathan Turley writes in The Hill: In recent filings, Disney appears to acknowledge that Smith’s invisible hand is […]

Biden Gave Americans 10 Years of Inflation in Only 3

Americans have endured a decade’s worth of inflation during the three years Joe Biden has lived in the White House. Bloomberg’s Reade Pickert and Jennah Haque report on the cost-of-living squeeze Americans are suffering through today, writing: After years of inflation, US consumers are shouldering a burden unlike anything seen in decades — even as […]

Happy Black Friday

You know how Your Survival Guy feels about money: save a third, spend a third, pay taxes with a third. Well, today, let’s focus again on the spending. One of the best ways to keep you motivated and in the game is to take some trips every now and then. Life Comes at You Fast. […]

Which Jimmy Buffett Album Is Your Favorite?

This year, America lost one of its best-loved musicians, Jimmy Buffett. Over his career, Buffett released 32 albums, and Al Shipley at SPIN Magazine has ranked them, writing: Shortly before his death in September at the age of 76, Buffett finished his 32nd studio album Equal Strain on All Parts, backed by his longtime Coral Reefer […]

More Americans than Ever Own Guns

You have probably heard the phrase “voting with your wallet.” When it comes to the Second Amendment, that’s exactly what Americans are doing. More Americans own guns than at any time since polls began back in 1999. Today, 52% of Americans report owning a gun or living in a household that owns a gun. Alexandra […]