How Tiger Global lost $17 billion in tech investments
What's the story
New York-based Tiger Global, one of the world's biggest hedge funds, has been hit by losses of around $17 billion this year caused by the large-scale sell-off of technology stocks since last week. The hedge fund is known for its investments in high-growth, speculative companies, all of which have hit the ground after their pandemic peaks.
Context
Why does this story matter?
A look at the top 10 companies in the world will tell us that most of them deal in technology. Tech companies have made major profits for their investors in this century. Therefore, it's unsurprising that when they are going through a rough patch, investors are meant to feel the burnt. Even then, Tiger Global's $17bn loss is a wake-up call for the market.
Round-up
The fund lost two-thirds of its gains in 4 months
In the first four months of 2022, Tiger Global lost 43.7% of its main fund. In the same time frame, it also lost two-thirds of the gains it has made since its launch in 2021, according to calculations by LCH Investments. The fund's downfall is due to investors' fear of the effect of rising interest rates on their earnings from high-growth stocks.
Reason
Rising interest rate has caused panic selling of technology stocks
The top tech companies in the world have been going through a downward slide after the Federal Reserve increased the interest rates last week to curb inflation. Since then, tech giants have lost over $1 trillion in value. The rising interest rate has created doubt amongst investors about tech stocks and has led to panic selling. This had led large-scale sell-off of technology stocks.
Comparsion
Tiger Global's loss dwarfs Birdgewater Associate's pandemic meltdown
The global hedge fund industry is worth over $4 trillion. However, Tiger Global's dollar decline dwarfs many previous meltdowns. Yes, even the $12.1 billion loss reported by Ray Dalio's Bridgewater Associates lost in 2020 due to the pandemic. Or the infamous GameStop trading frenzy that cost Melvin Capital $6.8 billion in a month. Tiger Global comes out on top with its $17 billion loss!
Bio
Tiger Global is an offshoot of the erstwhile Tiger Management
Tiger Global was founded by Chase Coleman in 2001. He's one of the "Tiger Cubs" (the group of employees of erstwhile Tiger Management who started their own hedge funds). Helped by tech stocks, he has reaped rewards for investors since the fund's inception. At the beginning of 2021, Coleman was named the fourteenth best-performing hedge fund manager of all time.