Data from Hedge Fund Research shows the HFRX Global Hedge Fund Index slipped 1% in May, leaving it down 3.31% for the first five months of 2022. But preliminary figures from some companies show much larger losses, especially for funds that had invested heavily in tech and biotech stocks.
The broader S&P 500 index ended roughly flat for May, with the Nasdaq index down 2%. However, during the month, the S&P fell so much that it almost reached bear market territory. For the year to date, the S&P is down 12% and the Nasdaq 21%.
Tiger Global, one of the biggest companies in the industry, fell 14% in May, down 52% on the year, according to an investor. The firm has lost money every month this year after slipping 7% in 2021.
Similarly, RTW Investments, one of the hottest biotech funds in the industry, told investors that performance estimates for its RTW Flagship Fund, including designated investments, show the portfolio lost 9.51% in may. For the year, it fell 34.5%.
Life sciences and biopharma hedge fund Perceptive Advisors lost 19.4% in May, leaving the fund down 41.5% for the year, after falling 28% in 2021, according to an update for investors.
For many fund managers, the damage began long before May, when former market darlings reported unexpectedly poor returns. In April, Netflix said it had lost subscribers for the first time in a decade, causing its share price to plummet 35% in one day.
Billionaire investor William Ackman, who had racked up three years of very good returns, was caught up in the fall and flip-flopped by liquidating a three-month-old $1.1 billion bet on Netflix and recording a $400 million loss. In May, Ackman’s Pershing Square Holdings portfolio lost 9.5%, leaving the fund down 18.2% for the first five months of 2022.
It was also during this month that Melvin Capital, once one of the best performers in the industry, announced that it was going out of business after being skewered by misguided bets on even stocks like GameStop in the early days. of 2021.
But not all successful fund managers suffer.
David Einhorn, who made headlines a few years ago by betting on the downfall of Elon Musk’s electric vehicle maker Tesla, is sitting on double-digit gains this year, according to an investor. Einhorn’s Greenlight Capital fund gained 4.8% in May and is up 20.9% for the year, supported by investments in gold, macro bets and bets on the fall of non-companies. name.
Representatives of these funds declined to comment.
Indeed, some smaller hedge fund managers have said they expect cash inflows, as some hedge funds have proven adept at betting against certain securities by selling them short.
Investors said it could take longer than usual to get the numbers for May as companies price illiquid stocks. When the market turned against them, equity hedge fund managers reduced their use of borrowed money, or leverage, to try to hedge against steep drops, investors said.
Long-short hedge funds, which bet on the rise or fall of stock prices, have reduced their leverage by 15-20% since January, taking into account both their long and short positions, according to data from two prime brokers, taking their clients’ portfolios as a benchmark. Most of the deleveraging took place between February and April, a source said.