It was looking pretty bleak for Cadian Capital Management and its investors as recently as the end of October. The tech-focused hedge fund was down about 20 percent in what was otherwise another profitable year for markets overall and tech stocks, especially the mega caps.
Then the hedge fund headed by Eric Bannasch abruptly and dramatically reversed course in the final two months of the year. With a swing of more than 24 percentage points, it wound up in the black for 2024, up 4.55 percent, according to a hedge fund database.
The $2.3 billion fund significantly underperformed the S&P 500, which was up about 25 percent in 2024, including dividends. But Cadian and its investors were relieved that the fund did not lose money for the year and would start 2025 in the green.
Meanwhile, Cadian’s relatively new $80 million Opportunities Fund surged 83.4 percent last year and has compounded at 45.7 percent since its August 2022 launch, says someone who has seen the results. This is a concentrated best-ideas fund with ten or fewer positions that runs net long.
Cadian declined to comment.
The firm is one of a number of technology, media, and telecommunications hedge funds that have distinguished themselves in recent years by avoiding the most widely held and well-known tech, software, and internet names, especially the so-called Magnificent Seven. This strategy served Cadian well on Monday, when Nvidia and other high-profile artificial intelligence stocks plummeted by double-digit percentage rates. Other big tech names were down sharply as well.
Instead, a large portion of Cadian’s portfolio targets small and midcap stocks with huge upside and limited downside based on value versus cash flow risk rewards. Not only did all of the firm’s top holdings enjoy big gains in the last two months of the year, but they all surged on Monday as tech stocks plunged.
For example, the two largest positions — software company Elastic and Procore Technologies, which provides construction management software — account for about 19 percent of U.S.-listed longs. In the final two months of 2024, their stocks surged 25 and 12 percent, respectively.
Cadian also benefited from reversals in stocks in other sectors. Shares of fintech Remitly Global, its third-largest long, rose more than 25 percent in the final two months of the year. Guardant Health, the hedge fund’s fourth-largest long, saw its stock jump 40 percent in November and December, surging about 54 percent this month alone. The biotech company produces liquid biopsy tests that detect cancer mutations. And No. 5 long Braze, a cloud-based software company, rose about 31 percent in the last two months of 2024.
