BOSTON (Reuters) - Billionaire investor Chase Coleman’s hedge fund Tiger Global Management presented investors with a 28 percent gain last year when stocks zoomed higher, but he assured them he has not give up on betting against duds when the time is right.
“While we have heard, read, and seen many signs of capitulation from short-sellers, we remain highly committed to the strategy,” the firm said in its most recent client letter seen by Reuters on Friday. Last year it was wrong-footed by bets against grocer Whole Foods and mall operator General Growth Properties and said that six of its shorts were acquired.
“It is time-consuming and difficult, but we know that there will be a period when our hard work pays dividends,” the letter, said about the practice of betting that certain stocks’ prices will fall. The letter was dated Jan. 31, only days before the market began selling off.
Tiger Global’s dedication to short-selling may calm some frayed nerves after a tumultuous week when the Standard & Poor’s 500 stock index tumbled 10 percent from its January peak. The firm listed rising inflation, an escalation in trade wars and geopolitical instability as potential short-term threats to markets and stocks crumbled this week amid fears that rising prices could prompt faster rate hikes.
Hedge funds long marketed themselves as being able to protect capital when markets drop, but during the bull market, short-selling has largely been a drag on returns. Many firms gave up trying to pick losers.
At Tiger Global short-selling “detracted roughly 12 percent” from returns at its Tiger Global Investments portfolio, in 2017, the letter said.
This week shorting was seen as a prudent strategy. Data from Hedge Fund Research show the average hedge fund lost 2.21 percent so far this month.
Tiger Global said it was keeping its short-selling skills sharp even after frustrating outcomes in 2017. “As our mentor Julian Robertson used to say, short-selling is a bit like going to the gym. You’re not just going to show up one day and become powerful; you have to put in the reps on a consistent basis.”
Reporting by Svea Herbst-Bayliss; Editing by Lisa Shumaker