After Racking Up Losses In 2022 Coatue Management Is Building A “Shopping List”

Philippe Laffont’s Coatue Management declined 17% on a gross basis for the year to the end of May, outperforming the Nasdaq, which dropped 23%, but underperforming the S&P 500’s decline of 14%.

According to a copy of the fund’s marketing materials that ValueWalk has been able to review, Coatue’s flagship fund returned 5% net in 2021 and 65% net in 2020. It outperformed both the S&P 500 and Nasdaq in 2020 and 2021 but underperformed both indexes dramatically in 2021.

Q2 2022 hedge fund letters, conferences and more

Philippe Laffont founded Coatue Management as a tech-focused long-short hedge fund after leaving Tiger Management in the early 2000s, and the fund’s track record has been highly impressive. However, like many other so-called Tiger Cub hedge funds, Coatue has come unstuck this year.

Hit By The Bear Market

According to its May investor presentation, Coatue’s long public book underperformed the Nasdaq substantially during the first few months of 2022, with a return on invested capital of -45% compared to -23% for the tech-heavy index.

The firm blames anchoring bias “to the last 10 years” for its losses in 2022, as it has been difficult for the organization to adapt to the changing market. The presentation also admits that the fund “underestimated magnitude & speed of drawdown” in unprofitable tech stocks that had seen demand pulled forward due to the pandemic.

To deal with the changing market dynamics, the fund has materially reduced its gross and net exposure over the past 24 months. Gross and net exposure at the end of May stood at 23% and 14%, respectively.