finance star record losses

American investment fund Tiger Global has lost 17 billion dollars since the beginning of the year. An unprecedented way for one of the investment champions in the tech sector to say a lot about the state of the market and, in general, of the economy.

One of finance’s biggest stars – a hedge fund that subscribes to investments that bring in huge profits – has gotten a historic slap. Tiger Global has lost $ 17 billion since the beginning of the year, the Financial Times calculated in an article published on Tuesday (May 10).

Never has an investment fund experienced such losses in such a short time, American economic channel Bloomberg confirmed. Tiger Global’s false ventures surpassed the defeat of Melvin Capital, which lost seven billion dollars in a matter of days during the GameStop affair, and investment fund Bridgewater which saw 12 billion dollars evaporate at the start of the pandemic. . of Covid -19.

The false adventures of one of the “best financiers of all time”

“It’s a huge loss and all the more impressive because it has to do with Tiger Global”, assured Alexandre Baradez, market analyst at IG France. In its 21 years of existence, this American hedge fund has only lost money twice, once during the financial crisis in 2008. “On average, it has an annual return of 20% for customers its ”, defined the analyst.

A rich history of stock market successes has earned its founder, Chase Coleman, ranked among the 15 most important financiers of all time by LCH Investments, a company that evaluates the performance of investment funds. In 2020, he will still be the investor with the most revenue, with three billion dollars a year, Bloomberg said.

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Hence the astonishment provoked by the horrific losses of Tiger Global. “In four months, this investment fund has erased nearly three-quarters of all revenues since 2001,” the Financial Times said.

A devastation due mainly to the reversal of the trend in the area of ​​choice for this investment fund: high-tech. The collapse of the Nasdaq (the stock market index for new technologies), which has lost more than 20% of its value since the beginning of the year, and the stock market crash of Chinese tech groups have severely hurt the portfolio its.

“This is one of the investment funds most exposed to stocks in the innovation sector,” Alexandre Baradez summarizes. Tiger Global has gained a reputation for being at the forefront of all trends in the tech sector, investing in Facebook, Airbnb and lesser -known nuggets of the Chinese or European tech scene.

Too exposed to the tech sector?

Tiger Global’s false adventures are a testament to how quickly the face of the stock market is changing. “It shows that even seasoned investors who know their sector like the back of their hands are excited,” summarized Andrew Beer, analyst for investment fund Dynamic Beta, who was interviewed by the Financial Times.

Other funds specializing in new technologies have experienced a similar trajectory, without incurring such spectacular losses. The investments made by management company Ark Invest – whose raison d’être is to invest in innovation – “have lost 50% of their value since the beginning of the year”, Alexandre Baradez underlined.

Tiger Global, Ark Invest and others are like cicada in Jean de La Fontaine’s famous fable. These funds have “benefited from a decade of uninterrupted growth in tech, a sector that seems immune to all crises and which, moreover, is one of the big winners of the pandemic”, the summary by Alexandre Baradez.

They spend heavily, sure of the good fortune of Facebook, Apple, ByteDance (Chinese parent company TikTok) and other start-ups and “didn’t think to cover themselves in case the growth of this sector stops”, explanation by analyst from IG France.

However, this turnaround took place at the end of last year, and for a very long time these high-flying stock marketers did not want to believe it. “Seeing, for example, that Chinese technology companies have lost 50% of their value, some thought they could take advantage of it, by investing cheaper, convinced that China would come to the rescue. this company, ”Alexandre Baradez said. But Beijing has allowed these groups to continue to sink into the red.

Victim of the fight against inflation

The changing stock market climate owes a huge debt to the American Central Bank, which changed course in a matter of months. Last October, the Fed didn’t seem to be too worried about inflation, Alexandre Baradez recalled. And then at the beginning of the year, it indicated that its main priority from now on would be to calm the rise in prices, which prompted it to raise rates several times.

What has the fight against inflation got to do with Tiger Global’s bad luck? In the long run, rates are so low that the only profitable investments are the most risky assets – cryptocurrencies and tech starting stocks – so everyone wants them.

But rising rates means other investments – like bonds – are starting to look interesting as well. If risky assets just don’t pay off, the game may no longer be worth the candle. “Especially in the context of the current economic downturn, with tech groups announcing less impressive financial results [comme Facebook et Netflix, NDLR]”, Pointed out Alexandre Baradez. These risky stocks are no longer sought after, causing a loss of its value.

Tiger Global’s recessions therefore seem to be the price to pay for this sudden entry into this new stock market and financial reality, marked by more caution. And maybe this is just the beginning. “Technology is the first to be affected by this slowdown. Other sectors are also starting to suffer,” said the IG France analyst, who fears the impact of the contagion. Other funds, fueled by Tiger Global’s losses, will begin to offload their most risky assets, accelerating the Stock Exchange’s downward trend. How far ? If the movement accelerates, it could flow into the real economy, where listed groups will not be able to raise the necessary money in the markets to finance their growth.

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