The Tiger crowd is furiously battling to get back to even after one or in some cases two years of devastating losses. And as Institutional Investor has reported, this year many of them have made up a fair amount of ground, posting gains in the 20-to-30 percent range through November.
However, one Tiger Grandcub that is badly lagging its fellow felines is Dan Sundheim’s D1 Capital Partners. Its most popular Class C, which devotes 35 percent of assets to privates and 65 percent to public securities, is up just 5.47 percent this year after gaining a bit more than 2 percent in November. After losing about 32 percent last year, it needs to rise more than 50 percent just to get back to even. D1 declined to comment.
Why is it trailing behind the rest of the group? Blame its private portfolio, which is down 11.65 percent for the year through November, according to a person familiar with the firm.
The public portfolio is doing just fine, surging 21.8 percent for the year. It is outperforming not only the S&P 500 but several other Tiger-related funds as well, including Viking Global Investors (up nearly 14 percent), Coatue Management (up almost 21 percent), and Lone Pine (up 15 percent).
One-third of D1’s private portfolio comprises two companies, says someone familiar with the portfolio: Space Exploration Technologies Corp. (SpaceX) and Lineage Logistics. It is D1’s policy to mark up the value on an investment only when there is a new financing round at a higher valuation.
Other hedge funds’ private portfolios have not fared as poorly. But keep in mind that private portfolios among hedge funds differ wildly. And it is not known what methodology each firm uses to mark its valuations.
That said, the value of Valiant Capital Partners’ side pockets — the firm’s name for the private investment portfolio — was actually up 4.3 percent for the year through September, according to quarterly client reports obtained by II. And Third Point — not a Tiger-related fund — recently reported that privates accounted for slightly more than half of its hedge fund’s 1.4 percent loss for the year through November.
Like many Tiger-related funds, D1 was very active in the private markets in 2020 and 2021. It made a total of 20 new investments in the second half of 2020, 75 for all of 2021, and 15 more in first-quarter 2022 before activity in general all but dried up amid the huge tech sell-off in the public markets, according to Crunchbase. Since then, D1 has made a total of ten new private investments, including just five this year, all since August, Crunchbase says.
Meanwhile, D1’s public portfolio tends to differ from those of most of the other high-profile Tiger funds, which favor the most widely held tech stocks among hedge funds that have led the markets this year.
D1 likes to note that it is not a tech-driven firm, emphasizing consumer stocks instead. Nonetheless, at the end of the third quarter, its second- and third-largest U.S.-listed longs were among the most popular trades: Microsoft and Meta Platforms. The two stocks no doubt have helped prop up performance.
Otherwise, D1’s largest holdings don’t resemble the major holdings of the other well-known Tiger funds. By far the firm’s largest long at the end of the third quarter was Maplebear, the parent of Instacart, which went public late in the third quarter and was a major previous private investment for D1. Maplebear accounted for more than 12 percent of U.S. common stock assets at the end of the quarter, according to a regulatory filing. The stock is currently trading nearly 20 percent below its $30 IPO price.
D1’s fourth-largest long was health insurance provider Elevance Health, and its fifth-largest was mattress maker Tempur Sealy International, neither of which ever cracks the most popular hedge fund or tech stock lists. Other top holdings are electric vehicle maker Rivian Automotive and conglomerate General Electric.
