The stock market is going through a period of uncertainty and volatility, but some sectors could benefit from that.
Timothy A. Clary | AFP | Getty Images
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A wide divergence of performance has formed in the hedge fund industry amid the stock rout on Wall Street this year.
Tech-focused investors like Brad Gerstner and Tiger Global are getting crushed as growth stocks became the epicenter of the market carnage in the face of rising rates. Meanwhile, some value, macro and international oriented players are reaping sizable gains despite the market bloodbath.
Macro funds were a standout winner in April with a 5% surge, extending its 2020 rally to 15.5% thanks to strong performance in commodity, fundamental discretionary and trend-following strategies, according to data from HFR. On the flip side, technology-heavy hedge funds were among the biggest losers last month with a near 5% loss overall, HFR data said.
“If you owned growth stocks this year – like we did at Altimeter – you got your face ripped off,” Altimeter Capital’s CEO Gerstner said in a Twitter post Thursday. “As a hedge fund we expect to lose less than the indexes on the way down – this year we have lost more… Markets moved fast- we moved too slow.”
Altimeter’s four biggest holdings — Snowflake, Meta, Microsoft and Uber — are all down from 20% to as much as 60% year to date. The technology sector, especially unprofitable firms and richly valued software names, have been hit the hardest as of late. The Nasdaq Composite slid more than 13% in April, dropping almost 30% from its all-time high.
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Chase Coleman’s growth-focused flagship fund at Tiger Global tumbled 15% last month, pushing its 2022 rout to 44% and wiping out nearly all of its gains since 2019, according to Bloomberg News. Its biggest holdings as of the end of 2021 included JD.com, Microsoft and Sea Ltd, which are all down double digits this year.
Still, many players managed to dodge the brutal sell-off and overcome the extreme volatility on Wall Street.
Citadel’s multistrategy flagship fund Wellington rallied 7.5% last month, bringing its year-to-date performance to 12.7%.
New York-based activist and event-driven hedge fund manager Coast Capital is also beating the market this year as they looked for out-of-favor value names in Europe. Its Engaged fund is up 4% in April, advancing over 15% in 2022, according to a person familiar with the returns.
“Some of these companies we buy have lower valuations and lower share prices than they did in March 2009,” said James Rasteh, CIO of Coast. “When we turn our companies around, there’s often an important improvement in the margins and profitability of the companies. We make money even in declining markets.”
The overall hedge fund community dipped 0.9% in April, compared to the S&P 500’s near 9% loss for its worst month since March 2020, according to HFR. The S&P 500 is edging closer to bear market territory, down 18% from its record high, as the Federal Reserve’s aggressive tightening spurred recession worries.