Finance

Tiger Global Craters 52% In “Terrible” 2022, Cuts Fees As It Gates Illiquid Assets

Tiger Global Craters 52% In “Terrible” 2022, Cuts Fees As It Gates Illiquid Assets

The last time we mocked the simply glorious implosion of the biggest tech bubble momentum chasers of all (after SoftBank of course, which as regular readers know is The Bubble Era’s “Short Of The Century“), Chase Coleman’s Tiger Global, was one month ago when we found them plunging 14% in April and bringing their YTD losses to 44%, and when we made the following remarkable observation: “Tiger Global’s long-only fund was hit even worse, tumbling 25% last month and extending its drop for the year to 52%. Yes, one of the world’s most respected “hedge funds” has lost more than half of its value in 4 months!”

Fast forward one month when that momo clowncar Tiger Global – which will never again be used in the same sentence with the word “respected” ever again – has continued to implode at an unprecedented pace, with Bloomberg today reporting that the hedge fund, which not too long ago had an AUM approaching $100 billion, lost another 14.2% in may, bringing its YTD loss to an unprecedented 52% this year prompting the firm which should never again be called a “hedge fund” but at best a “massively-levered high beta momentum chasing fund”, to cut management fees and create separate accounts for the illiquid investments of all those many customers who want to redeem, but can’t (i.e., are gated).

Tiger Global – or is that Housecat Domestic’s  “massively-levered high beta momentum chasing fund” lost money every month this year, putting it on track for what Bloomberg called a “Terrible year” and with good reason: 2022 has been its worst annual performance. It also means that the fund now has to make more than 100% just to get back to its high water mark!

“We take very seriously that our recent performance does not live up to the standards we have set for ourselves over the last 21 years and that you rightfully expect,” the New York-based firm wrote in a letter to investors. “Our team remains maximally motivated to earn back recent losses.”

Chase Coleman

The hedge fund, which was invested in the who is who of tech stonk darlings that soared for the past decade and have since cratered as the wave went out, was buffeted not only by continued losses in stocks but also by substantial markdowns in its private assets, according to an investor letter seen by Bloomberg News and a person with knowledge of the matter.

Meanwhile, to compensate investors for gating their illiquid holdings in so-called side-pocket accounts, Tiger is allowing clients to pull more of their cash regardless of any lockup terms. As such, customers can redeem as much as 33% of their investment this year — up from the usual limit of 25% from the hedge fund and 20% for the long-only product; it of course will gate any “illiquid” positions which are defined as such by the firm. The changes are temporary, and Tiger Global plans to revert back to all-cash redemptions “as soon as it is prudent to do so,” it said in the letter. 

What is stunning is that even with these historic losses which the fund will never be able to undo (just look at that other clowncar, Melvin Capital, which shuttered instead of even trying to recover losses) there is no shortage of idiots out there, and Tiger’s fund has seen five times more inflows than the amount of redemptions requests, according to Bloolmberg sources. Inflows have come from both firm employees and external clients. If only there was a saying about throwing away good money after bad.

Needless to say, we doubt any of this is true because if there were indeed so many people just waiting to give their money to Tiger, it wouldn’t be slashing its fund is cutting down its management fees by 50 basis points until December 2023. If anything, you cut your stem the exodus, and that’s precisely what is going on behind the Tiger’s scenes. And while the company tried to comfort its few remaining investors – who have just lost half their investment in 5 short month – that it “has adequate resources” to accommodate the fee cut without it affecting the quality of its service, we would be far more cautious and proceed with the assumption that the epic run on Tiger’s holdings is only going to accelerate.

And speaking of Tiger’s 50 biggest equity longs, here they are again: no surprise they have all gotten crushed in 2022 as other hedge funds short them hoping to force Tiger’s liquidation.

Finally, how to make any sense of all this? Simple: as we said last month, Chase Coleman’s firm, riding on the back of the Fed’s relentlessly growing balance sheet, had long been one of the hedge fund world’s “best performers” although it now appears that it was all just a function of Fed liquidity and very little talent.

Tyler Durden
Thu, 06/02/2022 – 13:30

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