Tech stocks: Hedge funds have speculated massively

Tech stocks: Hedge funds have speculated massively
Written by insideindyhomes

Scores of investors have been caught flat-footed by the price slide in once-hyped growth and tech stocks. Not only private investors have lost a lot of money in the face of the price slide, but also a number of investment professionals. In addition to star investor Cathie Wood, a multi-billion dollar hedge fund with tech stocks that were once in demand has apparently speculated heavily.

As the “Financial Times” reports, the hedge fund Tiger Global had to record a loss of 17 billion dollars this year alone because the fund continued to focus on the formerly popular technology stocks. In the first four months of the year, Tiger Global lost about two-thirds of the profits it had accumulated since the hedge fund was launched in 2001, according to the Financial Times.

Tiger Global is one of the so-called Tiger Cub funds, set up by hedge fund managers who once learned their trade at Tiger Management from hedge fund legend Julian Robertson.

Tiger Global posted a loss of around 43.7 percent in the first four months of the year, as the “Financial Times” had previously reported. In 2021 as a whole, Tiger Global had made a loss of around seven percent. The losses stand in stark contrast to the gains Tiger Global has been able to earn for its investors over the past two decades. Between 2001 and 2020, Tiger Global earned an average of more than 20 percent per year for its mostly very wealthy investors.

The following watchlist shows the ten largest US equity positions in Tiger Global’s portfolio as of the end of 2021 according to the so-called 13-F filings, in which investors with more than $100 million in US securities must regularly disclose their positions. The second column shows the performance of the shares since the end of 2021, columns 3 and 4 show the performance over the last 6 and 12 months.

The most heavily weighted stocks in the Tiger Global portfolio have lost between around 20 percent and around 85 percent of their value since the turn of the year. However, it is not known how the hedge fund changed its positions in the first quarter. Not a single US stock among Tiger Global’s top 10 holdings as of the end of 2021 is up since the turn of the year. Since hedge funds typically speculate not only with their equity but also with debt, Tiger Global’s losses could have been even greater than the stocks themselves.

It is not known whether the losses incurred by Tiger Global and other large speculators have recently exacerbated the slide in prices, but it would be quite plausible. If hedge funds have speculated on certain positions, large sales can occur within a short period of time, which can then amplify the corresponding price movements. In the worst case, a selling spiral ensues, with large sales causing prices to fall sharply, which then leads to further losses and selling by other investors.

Conclusion: The tumble of tech stocks in recent months has also caught many investment professionals off guard. For years, shares in technology and growth companies were the clear outperformers on the market and guaranteed above-average price gains. However, this has not been the case for some time. The hedge fund Tiger Global has therefore posted huge losses in the billions in recent months.

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