Dorsal Capital Management, run by former SAC Capital technology guru Ryan Frick, is the rare TMT firm that lets its investors sleep soundly at night no matter market conditions.
At least when it comes to its flagship fund Dorsal Capital Partners. The long-short fund was up just 13.2 percent in 2023, roughly half the gain of the S&P 500, according to the fund’s December tear sheet, sent to clients and seen by Institutional Investor.
Its investors, however, are probably not complaining. In 2022, when many tech-oriented funds dropped 20 to 50 percent — and several had lost money the previous year as well — Dorsal declined by less than 1 percent. So its investors are not worrying about issues such as the high-water mark or redemptions.
And even though the more volatile Dorsal Special Opportunities Fund lost nearly 2 percent in 2021 and close to 32 percent in 2022, it came roaring back last year, surging by 48.4 percent. It has already exceeded its high-water mark, an achievement most Tiger-related tech funds still can’t claim.
The recent results are not new for the firm, launched in 2009 by Frick and another former SAC Capital technology expert, Oliver Evans (Evans retired in July 2014). It manages nearly $3.6 billion, including $3.2 billion in the flagship fund and $382 million in DSOF.
Dorsal is long and short growth and value names, and it has a long-term commitment to running a low-beta, low-correlation fund. The firm tells investors that its returns don’t depend on whether tech is working, but on whether it’s creating alpha.
In 2023, Dorsal Capital Partners’ gross exposure averaged 145 percent, the highest level since 2018, according to the most recent monthly report. The fund averaged 102 percent in 2022. Last year’s average net exposure of just 11 percent was at the low end of its historical range, which topped out in the high teens. The fund, which is closed to new investors, typically has 20 to 30 long positions and 35 to 45 shorts.
DSOF is much more concentrated and volatile. At year-end, the fund, which is still open to new investors, held just nine long positions and no short positions. Its exposure was 95 percent, per the fund’s December tear sheet.
Although Dorsal’s risk profile differs greatly from those of most other tech-oriented hedge fund firms, the top of the firmwide portfolio closely resembles those of most competitors. Dorsal’s three largest longs at the end of the third quarter, accounting for nearly 30 percent of U.S.-listed assets, are among the Magnificent Seven stocks that have driven the broader market for more than a year: Meta Platforms, Amazon, and Microsoft.
The next-three largest holdings are consumer-oriented companies: food service distributor US Foods Holding Corp., fast-food holding company Restaurant Brands International, and video game giant Activision Blizzard.
Dorsal’s remaining top-ten longs are a mixture of consumer companies and tech: Salesforce, Zillow Group, Walmart, and Argentinian operator of online marketplaces MercadoLibre.
