Tiger Global Is Down 50%, But How Is the Rest of the Hedge Fund Industry Faring?

It seems hardly a week goes by these days without another headline touting staggering losses at another billion-dollar hedge fund.

While retail investors can enjoy a dose of glee at the expense of the “2-and-20” crowd — an indication of the industry’s high management fees, as the industry standard is 2% of assets under management plus 20% of returns — poor industry returns are also having an impact on retirees, as many pension funds are also investing in so-called “alternatives” such as hedge funds and private equity.

Last week, investors learned that Tiger Global Management’s year-to-date losses exceeded 50%. And Tiger isn’t the only fund to suffer massive losses this year.

On the other side of that coin is Crispin Odey, founder of London-based Odey Asset Management, whose Europe-focused fund has posted massive gains in 2022, thanks largely to a bet against government bonds.

Odey recently warned his investors in a note he has that “life is going to get a lot harder.” the Financial Times, suggesting he maintains a bearish outlook on the markets. His firm has not responded to a request for comment on this story from MarketWatch. Tiger Global declined to comment again this year.

Due to their opaque structure, the public only learns about fund performance through the media, as only equity funds are required to report their holdings on a quarterly basis. And even then, funds aren’t required to disclose positions in derivative instruments like options, a fact that famously allowed Bill Hwang’s family office Archegos Capital Management to build a massive position in a handful of its favorite stocks via total return swaps with its brokers without doing so must disclose ownership above the Securities and Exchange Commission’s 5% reporting threshold.

So how are hedge funds really doing? Fortunately, a handful of private and public data providers offer some pointers.

leaders and laggards

Performance across strategies and individual funds has varied widely this year, as certain strategies – such as equity long-short – have struggled while others – macro-focused funds and trend-following commodity trading advisors – have posted some of their best results in years.

Odey’s European fund leads the industry in terms of year-to-date performance, up more than 87% year-to-date through May 27, according to HSBC’s hedge fund industry tracker.

Second place goes to the Merchant Commodity Fund, which, as the name suggests, bets on commodity markets with futures, options and swaps his website.

Third is Progressive Capital Partners’ Tulip Trend Fund, a systematic trend-following fund designed to outperform during bear markets. Merchant and Progressive have not responded to requests for comment.

At the other end of the spectrum, the worst performer so far this year has a connection to Tiger Global: the fund is Maverick Capital’s Maverick Fund, a diversified equity fund with around $800 million in assets. The company was founded by “Tiger Cub” Lee Ainslie III. It is based in Dallas, Texas.

Number 2 on HSBC’s list is the Perceptive Life Sciences Offshore Fund, one of the funds managed by Perceptive Advisors and its founder Joseph Edelman. The offshore fund is incorporated in the Cayman Islands and focuses on the biotech and pharmaceuticals sectors (it also topped HSBC’s list of 2021’s biggest losers).

#3 is the Equitile Resilience Feeder Fund, another diversified global equity fund. An Equitile representative said it was unfair to compare the Resilience Fund’s performance to long-short equity funds because he was only long and didn’t scale back his equity exposure when markets fell.

Perceptive Advisors and Maverick Capital have not responded to requests for comment from MarketWatch.

Source: HSBC

outperform macro funds

For a broader view of how the industry is doing, HFR publishes monthly industry performance updates. Their summary of hedge fund performance in May showed that macro funds are up more than 12% on an asset-weighted basis, ranking them among the top performers.

Commodity funds are up 12.5%, while diversified systematic funds — funds that typically use algorithm-driven strategies — are up 14.4% year-to-date.

In equities, the HFR index of equity fund performance fell 8.85% year-to-date, while an index of technology and healthcare funds fell more than 15%.

Unsurprisingly, funds focused on Russia and Eastern Europe have been among the biggest losers for 2022 so far, with this sub-index down more than 50% year-to-date.

As for stock funds, a broad index of global stock fund performance showed that these funds fell 0.5% in May despite the stock market rally in the last week of the month, helping the S&P 500 and Dow Jones Industrial Average, just above to make ends meet – it gains for the month. That was still better than her performance in April; where the index fell 2.9% on an asset-weighted basis.

Fund performance by region showed North American funds lost more than 5%, compared to a 0.7% gain for HFR’s global index.

Another popular benchmark used as a proxy for equity-focused hedge funds is the Goldman Sachs Hedge Fund VIP Index ETF GVIP.
With just over $150 million in assets, the ETF — which tracks a basket of stocks said to be popular with the hedge fund crowd — is down more than 22% so far this year, compared with more than 13.6% for the S&P 500 SPX.
and more than 22.7% for the Nasdaq Composite COMP,
which consists more of technology stocks.

CTAs on track for best year in decades

Although a different group is sometimes treated separately from hedge funds, it’s worth noting that commodity trading advisors (CTAs) are having one of their best years in recent memory. Corresponding the CTA index of Societe Generalethese trend-following funds are up nearly 20% so far this year through June 1st.


Source: BTIG

The industry’s bumpy performance this year hasn’t had a major impact on the amount of capital hedge funds have to manage. According to HFR, hedge fund assets grew by $19.8 billion on a net basis in the first quarter of 2022.

Total assets under management were $4.002 trillion at the end of the first quarter, compared to $4.008 trillion at the end of 2021.

Event-driven funds raised the most new capital in the first quarter, raising $12.8 billion under management, despite losing more than $27 billion in the market. Equity funds raised just $1.9 billion while losing nearly $50 billion.

In comparison, macro funds have raised just $3 billion but made more than $37 billion from their trading activities.

Equity funds remain the most popular strategy, with 29.49% of industry assets in these funds, while event-driven funds come in second with 27.53% of assets. Relative value funds came third with just over 26.05% of assets, while macro funds managed around 16.94%. Tiger Global Is Down 50%, But How Is the Rest of the Hedge Fund Industry Faring?

Brian Lowry

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