Cadian Capital Management, headed by Perry Capital alum Eric Bannasch, is off to another strong start and is now poised to post its best back-to-back performance in eight years.
Its two long-short equity funds, Cadian Fund and Cadian Offshore Fund, surged 8.3 percent in May, according to a person familiar with the funds’ performance. As a result they are now up about 13.5 percent for the year. Last year, Cadian Fund returned nearly 21 percent, while the offshore fund gained about 19 percent, according to the firm’s first-quarter investor letter, obtained by Institutional Investor.
Since its October 2007 inception and through the first quarter of this year, Cadian has posted total gains of more than 170 percent, easily exceeding the Standard & Poor’s 500 stock index, which rose about 117 percent during the same period, according to the letter.
Today the firm manages about $1.6 billion. Bannasch declined to comment.
The fund has a heavy tilt toward technology stocks. This is not surprising given that before founding Cadian, Bannasch spent four years with Perry as a managing partner and portfolio manager of the hedge fund firm’s technology, media, and telecommunications practice. From 1999 to 2001, Bannasch worked at networking company Cisco Systems, which was highly acquisitive at the time, as a senior manager in the company’s corporate mergers and acquisitions and investments group.
While Cadian has benefited significantly from tech stocks, it is not betting heavily on the so-called FANG stocks — Facebook, Amazon, Netflix, and Google — and other popular hedge fund holdings, unlike many of the Tiger Management descendants that also run long-short equity hedge funds with substantial technology portfolios. Cadian does own Facebook, but the social media giant only ranks as the firm’s ninth-largest holding.
Rather, May performance was driven by digital printing specialist Electronics for Imaging, Cadian’s sixth-largest U.S. long, and online game maker Zynga, the firm’s tenth-largest long. In the first quarter, Cadian’s five top performers were cyber-security giant Palo Alto Networks, Ireland-based biopharmaceutical company Jazz Pharmaceuticals, business intelligence software giant Tableau Software, customer service software company Zendesk, and online travel agency Booking Holdings, formerly called The Priceline Group.
Cadian’s team typically looks for companies that are leaders in their space, with market capitalizations between $1 billion and $20 billion. It intentionally avoids mega-cap stocks. The firm usually runs net long, with net exposure somewhere in the high 30 percent to low 40 percent range.
It is looking for opportunities in areas of technology such as cyber security, underscored by its large stake in Palo Alto Networks. Cadian’s largest long holding, Interactive Corp., also underscores the type of companies it is gravitating to these days. Interactive Corp. owns more than 150 online consumer brands, including home repair referral service Angie’s List and dating services such as Tinder, OurTime, OkCupid, and 80 percent of Match.