Tiger Global Management’s woes continued in July.
The New York-based firm, founded by Tiger Cub Chase Coleman, has been especially hurt by its publicly traded long positions this year. This means Tiger Global has just five months to get its hedge funds back to break-even for the year. But given its tech-heavy focus — and the fact that defensive stocks are in favor right now — that may be a tall order.
Tiger Global’s hedge funds were roughly flat for the month, posting just a 30-basis-point loss. However, the decline extended their loss for the year to 20.6 percent in the firm’s long-short funds, which it collectively calls Tiger Global Investments.
In the first half of 2016, the hedge funds’ long book accounted for 14.8 percentage points of their 21.3 percent gross loss for the period, according to documents obtained by Alpha. All of Tiger Global’s losses, and most of the long portfolio’s losses, came in the first quarter. In the first half of the year, the firm also posted a 16.5 percent loss in its long-only fund, Tiger Global Long Opportunities.
So far Tiger Global investors are sticking with the firm. Assets under management in the hedge funds totaled nearly $5.9 billion at the end of the second quarter, down nearly 20 percent from year-end, in line with the performance decline.
We earlier reported that in the first quarter, Tiger Global slashed its exposure levels. Gross exposure was reduced to 134.2 percent from about 199 percent at year-end, while net exposure was cut to just 5 percent, from 40 percent at year-end. At the end of June, gross exposure was trimmed further, to 127.5 percent, while net exposure stood at around 6 percent after averaging around 12 percent for the second quarter.
Explaining its losses for the year in its second-quarter letter, Tiger Global tells clients stocks with healthy dividend yields in the telecommunications, utilities and real estate sectors have been among the broader stock market’s best performers. Of course, the firm favors the high-flying new economy companies among the technology and Internet sectors.
“This defensive, yield-seeking environment has not been well-suited for our portfolio,” the letter states.
In fact, media and Internet longs accounted for more than two-thirds of the public equity portfolio’s loss in the hedge funds, while technology longs accounted for most of the remaining losses. (Tiger’s hedge funds also contain a proportion of private investments, and the firm runs separate venture capital investment funds as well.) Specifically, losses came from Chinese e-commerce giant JD.com, online travel company The Priceline Group and iPad and iPhone pioneer Apple, while e-commerce giant Amazon.com made money.
Tiger Global singles out two stocks it currently finds “compelling”—Priceline and cable giant Charter Communications. It calls Priceline the world’s leading online travel aggregator, led by Booking.com. Since early May, the stock has been highly volatile. In late June it dropped about 15 percent following the Brexit vote, which is possibly around the time Tiger Global stepped up and bought more shares. “During the second quarter, in the buildup to Brexit and its aftermath, we were offered opportunities to purchase additional shares of Priceline at attractive prices,” the letter states.
Tiger Global points out that Charter is one of the two largest Internet and pay TV service providers in the U.S. after its recent acquisitions of Time Warner Cable and Bright House.
“The company’s network footprint positions it well for technology changes like 5G wireless,” the report notes, also pointing to the company’s flexibility in packaging content for customers. It also calls the management team “best in class, shareholder-oriented and highly economically incentivized to drive stock price returns.” The hedge fund firm says it expects the stock to double in the next three to four years.
Ultimately, the firm concedes it needs the markets to be better suited for its investing style for its funds to rebound sharply and generate strong returns.
