| O. Andreas Halvorsen, Viking Global Investors (Bloomberg) |
The market’s big selloff over the past two months has resulted in a huge disparity in performance among hedge funds. This pattern is no different among the so-called Tiger Cubs and other long-short managers with roots in Julian Robertson Jr.’s Tiger Management, who have generated their own version of the good, the bad and the ugly.
The worst of the lot so far appears to be Tiger Ratan, headed by Nehal Chopra. The fund was said to be down at least 21 percent in September alone — and maybe even more — according to multiple people familiar with the firm’s results. As a result, Tiger Ratan is now negative for the year.
Tiger Ratan runs a very concentrated portfolio of just 16 individual stocks. This strategy especially hurt the fund in September, since its two biggest holdings — which accounted for 35 percent of its U.S. equity assets at the end of the second quarter — are drug makers that have been among the biggest targets of investor selling.
For example, Valeant Pharmaceuticals International, which plunged 22 percent last month alone, accounts for nearly one-quarter of the fund’s assets. Allergan, another drug maker and Tiger Ratan’s second-largest holding at more than 11 percent of its assets, fell 10 percent last month. Pinnacle Foods, the fund’s fourth-largest holding, tumbled more than 6 percent last month.
At the other end of the spectrum is Lee Ainslie III’s Maverick Fund, managed by Dallas-based Maverick Capital. The Maverick Fund was down only 2 percent in September, leaving it up 18 percent for the year, making Ainslie one of the best-performing hedge fund managers this year.
The rest of the Tiger crowd is somewhere between Tiger Ratan and Maverick. The long-short equity hedge funds operated by New York-based investment firm Tiger Global Management lost 4.8 percent last month and are now down more than 5 percent for the year. The firm’s long-only equity funds declined by 6.8 percent last month.
On the other hand, the three funds managed by O. Andreas Halvorsen’s Greenwich, Connecticut-based Viking Global Investors managed to avoid major disaster last month even though the firm has had a big bet on the embattled healthcare sector.
Viking Global Equities, its long-short fund, fell 3.1 percent in September. It is still up 4.1 percent for the year, however.
At the end of the second quarter, various health care companies accounted for 43.5 percent of Viking’s 147.4 gross exposure in Viking Global Equities and 19.6 percent of its 51.7 percent net exposure.
The Viking Long Fund was off 5 percent in September, putting it in negative territory for the year. However, it is down just 1.1 percent year-to-date, also much better than the broad equity indexes.
Meanwhile, the firm’s new hybrid fund, Viking Global Opportunities, is the star of the show. It lost just 2.3 percent last month, so it is still up a very impressive 11.1 percent for the year.
We reported back in August that Viking was planning to open Viking Global Opportunities on October 1 to current Viking investors or outsiders. The fund was launched at the beginning of the year and designed to accommodate illiquid securities. In its second-quarter letter, Viking said the portfolio held seven unlisted companies.
Meanwhile, the long-short funds managed by Stephen Mandel Jr.’s Greenwich, Connecticut-based Lone Pine Capital fell about 4 percent or so in September, say people familiar with the firm’s results. Even so, the funds are still up more than 5 percent for the year. And the firm’s long-only fund is down just 2 percent for the year, much better than the broad stock indexes. In the second quarter, Lone Pine initiated several new positions, including one in Allergan.
One of the best-performing Tiger Cubs and hedge funds in general this year is London-based Tosca Opportunity, managed by London-based Toscafund Asset Management, headed by Martin Hughes. It gained 0.1 percent in September and is up 15 percent for the year. Its biggest winner is Findel, an online UK retailer, whose stock jumped earlier in the week when aggressive investor Sports Direct took a 19 percent stake.
But the best September performance from Tiger-affiliated managers appears to have come from Philippe Laffont’s Greenwich, Connecticut-based Coatue Management, which posted a 0.33 percent gain in its long-short fund in September. As a result, it is up 3 percent for the year.
