How it all turned sour for Tiger Global | FT Big Deal
Over two decades, Tiger Global’s punchy bets on the growth of tech firms helped it become one of the world’s most successful hedge fund and private equity firms. But as the FT’s Laurence Fletcher explains, rising interest rates have made tech companies with projected cash flows far in the future less appealing, and recently Tiger Global has posted some spectacular losses. So, where to from here?
Few funds epitomize the huge bull market in technology stocks,
and the recent vicious selloff, quite like Chase Coleman’s Tiger Global.
A favourite protege of legendary hedge fund manager Julian Robertson,
Coleman set up his New York-based firm in 2001
during the bursting of the dot-com bubble, which saw the NASDAQ plunge in value.
Drawing on his mentor’s hugely successful investing style,
he hunted for companies with strong positions in industry and high barriers to entry.
Valuations, while important, could be a secondary consideration.
Chinese internet stocks, overlooked by western investors, were a source of early gains.
Coleman’s strategy proved highly effective. Its punchy bets on the growth of tech firms,
both listed and private, helped it become one of the world’s most
successful hedge fund and private equity firms.
Assets swelled to around $90bn.
By the start of 2021, Coleman featured in LCH Investments’ list of the top-performing hedge
fund managers of all time, above star names such as Steve Cohen, Alan Howard and Louis Bacon.
But Tiger Global’s style has recently fallen badly out of favour.
Rising interest rates have made tech companies with projected cash flows
far in the future less appealing.
Valuations have plummeted.
Its hedge fund, which suffered big losses on holdings such as Peloton,
posted a seven per cent loss last year.
Much worse was to come. This year to the end of May it lost a further 52 per cent, erasing the
majority of the dollar gains it had made for investors since launch more than 20 years ago.
So far investors appear to be backing Coleman, whose fund has cut fees this year.
He told investors he believes the losses mark
“one point in time on a long journey” and is committed to making them back.
Doing that will surely prove the toughest test of his career yet.
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