Coatue Management, a hedge fund run by “tiger cub” Philippe Lafont, is planning to return more than $2 billion in capital to investors in its Flagship fund on June 30. The fund suffered a stunning 9% loss for the month of March, and after that management decided to pare back its investments and retrench.

Coatue Management

Coatue Management founder Laffont: $5 billion is “right size”

“We are focused on returns and do not want to become asset gatherers,” Coatue founder Philippe Laffont explained in an investor letter published April 4th. He also noted the Flagship fund’s assets had grown from $1 billion to more than $7 billion in the past six years. “We believe the right size for Flagship is $5 billion,” he continued.

Gut-wrenching month of March

Laffont described the market’s downturn in March as “sudden and deep as some of the gut-wrenching dislocations of 2000-2002 and 2008-2009” in the investor letter. He also mentioned that Coatue’s long positions swung five- to 10-times more than the broader market.

He made no attempt to wipe the egg off his face or apologize in the letter. “Coatue lost money on both sides of the portfolio: long and short,” Laffont continued in the letter. “We have dealt with tough markets in the past, however. We are confident that we have the ideas and risk management to navigate this environment.”

In holding mode, but still in the game

Although the letter did not provide details, apparently Coatue has been significantly reducing its market exposure over the last couple of weeks. “This puts us in a position to go back on the offense when we choose, even though this approach means it might take us longer to recoup our losses,” Laffont explained.

In concluding the letter Laffont wrote, “We are investors not traders,” emphasizing the point that “size is the biggest impediment to returns.”

Background on Coatue Management

Coatue Management was established in 1999 by Laffont, who was a protege of Julian Robertson. The fund has done very well over the last decade and a half, with a broad investing focus, including a number of high-growth technology companies. Coatue’s Flagship fund has returned an annualized 12.5% return since inception, according to an investor who wishes to remain anonymous.