(Bloomberg) — Tiger Global Management snapped a two-year losing streak with a 28.5% gain in 2023, topping peers such as Viking Global Investors and Coatue Management, in what turned out to be a strong year for old-fashioned stock-pickers.
Most Read from Bloomberg
The funds got a boost from a rally in stocks in the fourth quarter that lifted the S&P 500 to a 26% return for the year and made long-short equity the best-performing hedge fund strategy. Still, much of that was driven by a small group of stocks that posted blowout gains, including Meta Platforms Inc. and Amazon.com Inc.
And some of the so-called Tiger Cubs that focus on technology stocks, including Tiger Global, sharply underperformed the Nasdaq Composite Index, which returned 45%. Coatue’s main fund rose 21.5%, according to people familiar with the matter. The main hedge fund at Viking, which has less tech-stock exposure than its peers, gained 13.8%.
Some stock-picking giants are still trying to dig themselves out of disastrous losses from 2022, when tech stocks plunged and valuations of private companies spiraled. Tiger Global’s hedge fund plunged 56% that year after losing 7% in 2021, meaning it will have to return about 90% to recoup those declines. Its long-only fund, which lost 67% in 2022, gained 20.4% last year.
Coatue’s hedge fund fell 34% in 2022, while Whale Rock’s sank 45%. Whale Rock gained 31.8% last year.
Last year’s gains for tech-focused stock-pickers were “almost an inverse of performance in 2022,” said Jon Caplis, founder of data provider PivotalPath.
“Last March they brought their leverage and equity market exposure down by almost 40% and haven’t increased it since then,” he said. “That’s why they didn’t capture nearly as much of the upside when the Nasdaq rallied.”
In 2022, the group captured 68% of the Nasdaq’s decline, and this year they only captured 37% of its gain, Caplis said. PivotalPath’s Equity Sector Technology, Media and Telecom Index, which tracks performance of TMT funds, gained 16% last year.
Viking Global’s reduced technology exposure helped the firm weather 2022 far better than its Tiger peers, but that strategy may have limited its upside in 2023. Short wagers also ate into returns.
Read More: Hedge Fund Clients Seek Out Stock-Pickers After Tough 2022
Anthony Bozza’s $2.5 billion Lakewood Capital Management made money on financial stocks in the US and Europe in 2023, as well as value-oriented long bets, gaining 23.4%, according to people familiar with the firm.
The firm took advantage of the market panic around the regional banking crisis, scooping up larger bank stocks as well as some regional players, one of the people said. The firm declined to comment.
Mixed Fortunes
Meanwhile, macro funds had mixed fortunes last year.
One of the biggest losers was Haidar Capital Management, which tumbled 43.5% in 2023, its biggest-ever loss in more than two decades of trading. Bridgewater Associates’s Pure Alpha II fund slumped 7.6% after losses in the last two months of the year wiped out earlier gains.
On the other end of the spectrum, emerging-markets-focused Discovery Capital — another Tiger cub — gained 48%.
The VIX, a closely followed measure of volatility in the markets, is near historic lows, which usually presages a difficult time for macro. But some managers are expecting more short-term volatility in the Treasury market ahead of rate cuts.
Multistrategy funds — which gained clout, assets and the attention of regulators over the past two years — ended 2023 in the middle of the pack. Their gains in the mid-to-high teens fell back in line with their historical norms, after some posted strong returns in 2022.
Representatives for the firms either declined to comment or didn’t respond to requests for comment.
Here’s a look at 2023 returns for other hedge funds:
–With assistance from Gillian Tan.
Most Read from Bloomberg Businessweek
©2024 Bloomberg L.P.
