Coatue Management liquidated positions recently as its tech-focused flagship hedge fund fell 17% year to date.
According to an investor presentation the asset manager is raising cash exposure to more than 80% for these times of “high uncertainty.”
That’s higher than during any recent selloffs like COVID and the taper tantrum, at levels not seen since the dot-com crash. The normal average cash level is 10%.
Coatue explained the decision, saying the value is that:
- “Can’t lose (nominal) money on cash!”
- “Forces team to re-assess macro and re-underwrite micro”
- “Upgrade quality of holdings when time is right to gross up”
- “Provides ‘peace of mind’ & flexibiiity to think”
Its long Public book had ROIC -45% vs. Nasdaq (COMP.IND) -23%. Coatue said it underestimated the magnitude and speed of the drawdown in COVID pull-forward and unprofitable tech and faced big losses in momentum longs.
Its short book had ROIC +32%, but it said it was a challenge managing volatility, short squeezes and reversal risk.
Coatue’s “big regret” was the anchoring bias to the last 10 years.
“Difficult for organization to adapt quickly to big regime change. Never easy to short stocks already down 50%+ from highs.”
It added that there was “no sign yet” of all-sector capitulation.
Tech-focused funds have faced a tough environment in 2022. Tiger Global is reportedly down more than 50% year to date.
See Coatue’s latest 13-F.