| Feroz Dewan, Tiger Global Management (Bloomberg) |
Tiger Global Management’s hedge funds extended their gains in August and are now among the best-performing funds so far this year. They also are perhaps the top performers among those whose managers have roots going back to Julian Robertson Jr.’s legendary hedge fund firm, Tiger Management Corp. New York-based Tiger Global, the firm’s flagship hedge fund, is managed by Feroz Dewan. It has gained 20 percent for the year after gaining 3.2 percent in August, according to an investor in the fund. Most of the gains have come in the past five months. The fund was up just 0.9 percent in the first quarter, according to the firm’s letter to clients. The firm is headed by Charles (Chase) Coleman III, who got his start as a technology analyst at Tiger Management.
It’s not clear what drove the hedge fund’s performance over the past two months. However, in the second quarter, when it posted a 14.4 percent net gain, long positions led by several Internet stocks accounted for nearly all of the performance, according to the firm’s second-quarter letter, obtained by Alpha.
Its big gainer during that period was online real estate company Zillow. Other big winners included Trulia, another online real estate company; Vipshop Holdings, a Chinese online discount apparel retailer; and JD.com, a Chinese e-commerce company.
In the letter, Tiger Global says it built a “material position” in Vipshop over a nine-month period. It explains that in China there is no meaningful offline retail industry, especially in the discount segment, paving the way for companies like Vipshop. Tiger Global says Vipshop is growing rapidly, generates strong free cash flow and has high returns on capital. Elsewhere, home furnishings company Restoration Hardware and cable giant Charter Communications also did well.
In the first half the fund’s average net exposure was 58 percent, excluding private companies, which include a position in Alibaba Group. Entering the third quarter, Tiger Global told clients it was focused on several key sectors: Internet, technology, media, telecommunications and consumer.
Its five largest long positions in U.S.-listed stocks were media giant 21st Century Fox, Vipshop, discount retailer Dollar General Corp., Zillow and TransDigm Group, which makes military components, according to Tiger Global’s second-quarter 13F filing.
Twenty-First Century Fox was up more than 11 percent in August, although the stock was essentially flat over the two-month period since the end of the second quarter. Vipshop gained more than 4 percent over the past two months.
Dollar General, which earlier this week made a hostile takeover offer for Family Dollar Stores, is up more than 10 percent over the past two months. Zillow was flat for the two-month period, although the stock did briefly spike in late July. TransDigm surged about 12 percent over the same period. On the other hand, Restoration Hardware, whose stock peaked on June 30, fell 9 percent over the ensuing two months.
Last year, Tiger Global’s domestic hedge fund rose just 14.3 percent, in a year when the U.S. stock market gained 30 percent, even though the fund’s long portfolio was up 56 percent, according to its year-end letter. The firm did not launch its long-only fund until the fourth quarter of 2013.
Tiger Global’s strong performance comes in a year when a number of Tiger Cubs and Seeds are struggling. At least four of them are down for the year.
Matthew Iorio’s Greenwich, Connecticut–based White Elm Capital Partners is still down by 10 percent through August even after gaining 1.4 percent last month, according to an investor. Paul Hudson’s Greenwich, Connecticut–based Glade Brook Global Offshore Fund was down about 2.6 percent, according to HSBC.
John De la Hey’s London-based Tosca fund lost about 6.6 percent through August, according to a document from HSBC revealing hedge fund results. And Robert Citrone’s two main South Norwalk, Connecticut–based macro funds are struggling to get back into positive territory after losses earlier this year. Through August, the Discovery Global Macro fund was down 13.85 percent and the Discovery Global Opportunity fund was down by 10.2 percent, according to a person familiar with its results.
Meanwhile, Jonathan Auerbach’s New York–based Hound Partners returned to gains last month after adding 3.8 percent in August, putting it up 2.4 percent for the year, according to an investor. Lee Ainslie’s Maverick Capital was up only about 1 percent through August, according to HSBC.
