Stephen Mandel Jr.’s final year running Lone Pine Capital on a day-to-day basis ended on a losing note.
The Tiger Cub suffered sharp losses in the fourth quarter and wound up finishing the year solidly in the red.
The firm’s long-short funds lost between 13 percent and 14 percent in the December three-month period. As a result, they finished the year down between 4 percent and 5 percent, according to an investor.
Lone Cascade, the firm’s long-only fund, also lost between 4 percent and 5 percent in 2018 after dropping a hefty 17 percent to 18 percent in the fourth quarter.
Even so, the funds outperformed the MSCI World index — Lone Pine’s preferred bogey — which dropped 8.7 percent last year.
Mandel declined to comment.
As we earlier reported, beginning this year Mandel will no longer run the portfolios on a day-to-day basis. Rather, David Craver, Mala Gaonkar, and Kelly Granat will continue in this role. Lone Pine also consolidated its three long-short funds into one bigger fund, Lone Cypress.
This will be a big test of Mandel’s succession plan. And the hedge fund industry does not have a good track record for smooth segues when firm founders retire or dial back.
Lone Pine started the year with $19 billion in assets, down from $26 billion the year before.
Mandel is not exactly planning to take it easy. He’ll still go to Lone Pine’s offices every day.
But as he hands over the reins of day-to-day money management, he can be satisfied that since he launched his initial long-short fund in 1998 after seven years working at Julian Robertson Jr.’s Tiger Management, the portfolio has posted a 14.4 percent annualized gain net of fees. This is the highest fee-charging portfolio.
During the same period the Standard & Poor’s 500 stock index compounded at 6.6 percent, while the MSCI World Index compounded at 5.8 percent.
Meanwhile, last year LCH Investments, a London-based fund-of-funds firm, reported that Lone Pine had made $27.2 billion in total profits for its investors since inception, ranking No. 4 among all hedge fund firms.
Lone Pine was hurt in the fourth quarter by some of the high-profile technology stocks it held, as well as its emerging-markets exposure, according to an investor.
For example, Alibaba Group Holding, its largest U.S.-listed long at the end of the third quarter, fell nearly 17 percent in the fourth quarter, while Microsoft, which was a close second in size, declined by more than 11 percent.
Adobe, Lone Pine’s third-largest U.S. long, fell by around 16 percent. Activision Blizzard, Lone Pine’s fourth-largest long, plunged 44 percent in the fourth quarter.
Lone Pine’s health care stocks fared a little better, however. Iqvia Holdings, the health information and clinical research giant and the hedge fund firm’s largest health care holding, fell by 10 percent in the final quarter — still a double-digit loss, but not nearly as bad as some of the tech names.
As 2019 began, the firm boosted its net exposure to the low 60 percent range from its usual range somewhere in the 50s. It did so by adding to its long holdings and trimming its short bets, according to the investor.
