Hedge Fund Tiger Global has had a rough year in 2021 and an even rougher year in 2022 so far. The hedge fund’s long only fund has lost 24.9% in April and is now down a total of 51.7% so far in 2022. This means that Tiger Global’s 2020 gains of 48% have now been completely erased. Tiger Global’s losses are breaking records and are among some of the largest losses in the history of hedge funds. So what does this mean for Tiger Global — what is the cause of the dramatic losses and how much can they really afford to keep losing?
WHY IS TIGER GLOBAL LOSING MILLIONS?
Tiger Global has been burned by their large stakes in tech companies as well as their short positions. Last year Tiger Global had about 35 billion in overall public equities and by 2022 they had experienced a loss of about 15 billion. Reports indicated that since there have been 82 active trading days from the beginning of January – April, this means that Tiger Global has lost about $183 million every trading day — which equals out to about a loss of $28.1 million in losses per hour. If investors with Tiger Global weren’t panicking last year, they should be this year.
WHAT IS NEXT FOR TIGER GLOBAL?
I’m sure we can imagine that Tiger Global CEO Chase Coleman is under serious stress as his hedge fund continues to try to put out fires and recoup losses. As their losses continue, investors are only going to become more upset and the chances of investors wanting to pull out their money is likely to increase. If investors begin to pull out their money, Tiger Global could run into some liquidity issues.
Additionally, when a hedge fund starts to see losses of this amount, there is a chance that employees might start looking elsewhere for work due to growing concerns of Tiger Global going all the way down. Not to mention, employees are likely not going to see any bonuses for a long time and hedge fund performance fees will be non-existent until the fund can recoup the losses and start making profits again.
We recently saw that CEO of Melvin Capital Gabe Plotkin tried removing the high-water mark for the hedge fund, but investors were not accepting of the proposal at all. Similar to Tiger Global, Melvin Capital is also experiencing large financial losses and the fund is not able to charge hefty performance fees until they make the gains back for investors. Typically, when hedge funds are doing well and making profit, they charge large performance fees of about 20%. At the current losses that Tiger Global and Melvin Capital are experiencing it could be years before they are able to charge performance fees.
As of now it appears Tiger Global is managing to stay afloat. However if they continue on the downward trend who knows how much longer they will be around and how much more of a loss investors will be willing to tolerate.