Coatue Returns 26% as Fund Boosts Stake in Apple, Hails IPhone

(Bloomberg) -- Philippe Laffont, founder of tech-focused hedge fund Coatue Management, said the firm boosted its stake in Apple Inc. and called the iPhone X “groundbreaking.”

The hedge fund increased its position in Apple to more than 9 percent of its gross exposure, Laffont wrote in a letter dated Sept. 27, which was seen by Bloomberg. His iPhone X endorsement was inspired by ARKit, a tool that lets developers build augmented reality applications for iPhones and iPods.

“What excites us is under the hood -- a new augmented reality platform that will fundamentally change how users interact with the real world, called ARKit," Laffont wrote. “We are just at the beginning of the adoption cycle for this technology which will drive demand for more advanced phones that leverage its key features."

Coatue's flagship hedge fund, which manages $8.7 billion, is one of the best-performing large funds this year, riding a rise in technology shares to gain 26.5 percent through August, the letter said. The average hedge fund rose 4.5 percent in the same period, while the S&P 500 Information Technology Index returned 26.6 percent.

Even though Google has offered an augmented reality software tool called Tango since 2014, developers have been slow to make AR apps, in part because hardware makers and cellular network operators are often slow to send updates to devices running Android's mobile operating system. Analysts think that Apple's ability to push the ARKit software to hundreds of millions of new and updated iPhones at once may convince developers to make new augmented reality apps for these devices.

Other highlights from the letter:

• While the fund's profits are due to long wagers, shorting “wireline fade, fiber cycle and anti-AMZN retail" have proved “winning themes."
• The firm has been adding staff on its data science and investment teams, and recently opened an office in Hong Kong.
• The firm's third private equity fund, Kona III, has raised $1.3 billion. Its final close is scheduled for October.

To contact the reporter on this story: Simone Foxman in New York at sfoxman4@bloomberg.net.

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Vincent Bielski, Steve Dickson