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March tech losses burn hedge funds

Betting on the growth of technology companies proved to be a dangerous game in March as sharp stock declines burned some prominent hedge fund investors.

Hedge fund firms that suffered stinging losses last month included Viking Global Investors, Coatue Management, JAT Capital and Jericho Capital Partners. Well-known tech investors like Lone Pine Capital, Blue Ridge Capital and others are also now down for the year, likely in part because of investments in the sector.

Andreas Halvorsen, chief executive officer of Viking Global Investors LP.
Daniel Acker | Bloomberg | Getty Images
Andreas Halvorsen, chief executive officer of Viking Global Investors LP.

Morgan Stanley's prime brokerage unit said in a report Tuesday that hedge funds focused on technology, media and telecommunications—the "TMT" strategy—were likely down about 4 percent in March with returns for most funds ranging from no loss to down 7 percent or 8 percent.

Prominent technology stocks that fell in March included Netflix (-21 percent); Pandora Media(-18.9); Twitter (-15 percent); Facebook (-12 percent); Priceline.com (-11.6 percent); Baidu (-10.7 percent); LinkedIn (-9.3 percent); Google (-8.3 percent); Yahoo (-7.1 percent) and Amazon (-7.1 percent).

Overall, the technology-heavy Nasdaq index fell 2.53 percent in March, while the Dow Jones U.S. Technology Index gained just 1.94 percent.

Tech-heavy hedge fund losses

Hedge fund firm
March flagship perf.
2014 flagship perf.
Aprox. firm AUM ($B)
JAT Capital -9% -5.6% 2.36
Coatue Management -8.7% -7.4% 9.2
Jericho Capital
Partners
-7.9% -5.3% 1.9
Viking Global
Investors
-5% 0.6% 28
Boardman Bay
Capital Management
-1% 3.9% 0.1
Blue Ridge Capital N/A -5% 9.05
Lone Pine Capital N/A -4% 27.1
Source: CNBC.com reporting

"We saw huge dispersion during the month and a significant rotation away from momentum names," analyst Rick Teisch said of the selloff in stocks with a high potential for growth. "Several high-flying, widely owned tech and biotech stocks were hit especially hard, which triggered selling in other names and led to weak performance for several funds."

Teisch, director of U.S. research at $7 billion fund of hedge funds Liongate Capital Management, said the March losses should be put in context. "Many of these funds came into the month with sizable gains and are still well ahead of the market on a year-to-date basis," he said.

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March was particularly cruel to John Thaler's JAT. The firm's main fund fell 9 percent over the month, leaving it down 5.6 percent for the year, according to a person familiar with the situation. That's a sharp reversal from 2013, when the fund gained 30.6 percent net of fees.

Large JAT technology stock holdings, according to a public filing in December, included Amazon, Google, Netflix and Pandora. A spokeswoman for JAT declined to comment.

Another big loser was Philippe Laffont's Coatue. The firm's main fund fell about 8.7 percent in March, leaving it down 7.4 percent for the year, according to a person with knowledge of the performance. Large public holdings as of December were Amazon, Baidu, Facebook, Google, Netflix and LinkedIn.

Coatue gained nearly 20 percent in 2013, according to Institutional Investor's Alpha. A spokesman for the firm declined to comment.

Some tech-heavy funds were able to stem losses.

One example was Boardman Bay Capital Management, an approximately $100 million hedge fund run by Will Graves. The firm's main fund fell about 1 percent in March but is still up 3.9 percent for the year, according to a person familiar with the performance.

Boardman Bay lost on Facebook and other stocks for the month, but gained on Cisco Systems, EMC Corporation and telecommunications stocks, according to the person.

Graves declined to comment.

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March performance for $9.05 billion Blue Ridge and $27.1 billion Lone Pine was unavailable, but it's likely that technology stocks contributed to their respective year-to-date declines of 5 percent and 4 percent.

Blue Ridge, led by Tiger Management alum John Griffin, held Amazon, Google, Twitter and LinkedIn, according to a December regulatory filing. Blue Ridge invests in many stock sectors outside of technology, including financial and consumer-oriented companies.

Lone Pine, led by fellow Tiger alum Stephen Mandel, had large positions in Priceline, Baidu, Facebook. Lone Pine also does not invest exclusively in technology stocks. The firm's Lone Cypress gained about 18 percent before fees in 2013, according to the same Alpha report.

Spokesmen for Blue Ridge and Lone Pine declined to comment. All other firms mentioned either declined or did not respond to requests for comment.

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