In an all around tough time for technology stocks, and hedge funds that have focused their portfolios on tech stocks have suffered due to the slump. Tiger cubs, off-shoots of Julian Robertson’s Tiger Management, have seen lukewarm returns in the last quarter after a particularly profitable 2013.
Coatue’s $7 billion fund slumps in Q1
PhiIippe Laffont’s Coatue Management has been particularly hard hit; the flagship hedge fund with $7.1 billion under management posted a loss of 7.2% in Q1, according to performance data reviewed by ValueWalk. Coatue’s smaller allocations which were launched in the first half of 2013 are not doing well either. Coatue Long Only Fund is down 5.8%, Hybrid is down 2.5% whereas the Exuma fund suffered a 9.7% loss in the first quarter.
Take a look at Coatue’s star recruit from Goldman Sachs.
Laffont said that the return on modern technology names like Google Inc (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN) has been many times that of old tech companies like Nokia and Dell. The manager said that the fund is on a constant lookout for winners and losers in the rapidly changing tech space. The letter said that the potential of outsized returns from these holdings also puts Coatue at risk in times when markets switch from growth to value stocks and/or favor secular companies compared to cyclicals.
Returns at other tiger cubs
Lone Pine Capital, Discovery Capital, Joho Capital and Coatue Management, Maverick Capital have all been struggling based on their recent investment returns. According to II Alpha, Andreas Halvorsen’s Viking Global is still making some money this year, albeit modestly.
Lee Ainslie’s Maverick Capital was up 0.7% in the first quarter. Lone Pine Capital’s Cypress and Kauri funds were down 3.4% and 4.2% respectively in Q1. Lone Cascade, a long-only fund, incurred a loss of 3.1% in the quarter, according to investment returns reviewed by ValueWalk.
Returning ~$2 billion to investors in June
Taking a more risk-averse approach, Coatue was pulling back its net exposure in the last quarter. In this defensive mode the flagship fund is at its -10% drawdown target and volatility is up 2-4 times normal.
The fund announced that it will return 25-35% of the flagship fund’s assets back to investors at the end of June, which means $1.7-2.5 billion will be returned. The letter said that they are not fond of hoarding assets and flagship’s portfolio is already replicated by the Hybrid fund’s portfolio.
Coatue’s Hybrid funds invest in mobile internet companies
Laffont said that he wants to focus on investments in private companies through the hybrid funds. Coatue is planning to launch Hybrid II and will be offering the investors of the flagship fund the first go at it. Unlike Hybrid I that raises capital for specific investments, Hybrid II will invest from committed capital whenever it sees opportunities in private equity.
Coatue is currently investing in mobile internet companies. Hybrid invested $50 million in Lyft through independent and co-investments. Lyft provides peer-to-peer ridesharing facilities through its online application. The fund also invested $15 million in Flipboard, an online magazine which collects news from diverse sources.
Hybrid I has deployed 70% of its capital in private equity, while the rest is invested in hedge funds. The fund has also invested in Box.net, an online file-sharing application and Snapchat, a rival to messaging services like Whatsapp and Blink.
Coatue was cutting exposure in Q1, so we will soon be taking a look at what the fund sold. Stay tuned for further details from the 13f filing which is coming out today.