Tiger Cub Coatue to return $2 billion to investors amid volatility

Hedge fund Coatue responds to tech volatility
Hedge fund Coatue responds to tech volatility

Hedge fund Coatue Management plans to return more than $2 billion in capital to investors in its flagship fund on June 30 after extreme volatility in technology stocks led to a 9 percent loss in March.

"We are focused on returns and do not want to become asset gatherers," Coatue founder Philippe Laffont wrote in an April 4 investor letter reviewed by CNBC. He added that the flagship fund's assets had grown from $1 billion to more than $7 billion in the past six years. "We believe the right size for Flagship is $5 billion," he wrote.

Laffont said the market's move in March was as "sudden and deep as some of the gut-wrenching dislocations of 2000-2002 and 2008-2009." During the month, Coatue's long positions moved five- to 10-times more than the broader market, he wrote.

"Coatue lost money on both sides of the portfolio: long and short," he wrote. "We have dealt with tough markets in the past, however. We are confident that we have the ideas and risk management to navigate this environment."

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Coatue is one of several large hedge funds that suffered unusually large losses in March, when high-growth companies like Facebook, Amazon and Netflix suffered sharp declines. Coatue, which owned all three of those stocks as of December 31 filings, is known as a Tiger Cub because Laffont is a former employee of Julian Robertson's Tiger Management. Founded in 1999, Coatue has often generated large returns with a focus on high-growth technology companies. According to an investor, Coatue's main fund has returned an annualized 12.5 percent since inception.

In response to the market move, Coatue has reduced its gross and net exposure to levels near historic lows, suggesting many of the company's positions were already pared down last week."This puts us in a position to go back on the offense when we choose, even though this approach means it might take us longer to recoup our losses," Laffont wrote.

"We are investors not traders," Laffont said, adding that "size is the biggest impediment to returns."

A spokeswoman for Coatue declined to comment.

—By CNBC's John Jannarone.