Tiger Global’s 52% Plunge Prompts Fee Cut, Redemption Plan

(Bloomberg) -- Losses at Tiger Global Management reached 52% this year, prompting the firm to cut management fees and create separate accounts for the illiquid wagers of customers who want to redeem.

The firm's hedge fund sank 14.2% last month, buffeted by losses in several stocks and substantial markdowns in its private assets, according to an investor letter seen by Bloomberg and a person with knowledge of the matter.

As the value of its public holdings plummeted, Tiger's exposure to illiquid venture capital bets comprised too much of its portfolio -- leading the firm to tell investors in its hedge and long-only funds that, if they wish to redeem, their private investments will be placed in a separate account that will be cashed out at a later date. The firm is also cutting management fees for the hedge fund by half a percentage point to 1% through December 2023. It's performance fees are 20%.

“We take very seriously that our recent performance does not live up to the standards we have set for ourselves over the last 21 years and that you rightfully expect,” the New York-based firm wrote in a letter to investors. “Our team remains maximally motivated to earn back recent losses.”

Hedge fund managers known as Tiger Cubs made billions riding tech stocks to dizzying heights. In recent years, many added illiquid venture capital holdings to their portfolio, hoping to capitalize on soaring valuations and a hot market for initial public offerings. Instead, years of gains evaporated as the markets turned violently against them in the first quarter. The tech-heavy Nasdaq Composite Index has lost 23% this year and the S&P 500 is down 14%.

To compensate for putting their illiquid bets in so-called side-pocket accounts, Tiger is allowing clients to pull more of their cash regardless of any lockup terms. Customers can redeem as much as 33% of their investment this year -- up from the usual limit of 25% from the hedge fund and 20% for the long-only product. The changes are temporary, and Tiger Global plans to revert back to all-cash redemptions “as soon as it is prudent to do so,” it said in the letter.

A spokeswoman for Tiger Global declined to comment.

Tiger Global's hedge fund has lost money every month this year, putting it on track for its worst annual performance ever. By April, the hedge fund's 44% tumble, along with losses in its long-only and crossover funds, wiped out about $16 billion. Last year the hedge fund dropped 7%.

Even with the losses, Tiger's hedge fund has seen five times more inflows than the amount of redemptions requests, according to the person. Inflows have come from both firm employees and external clients.

The firm “has adequate resources” to slash its fees “without negatively impacting the quality of research delivered by our team or our focus on maximizing exits from private positions, both of which are of paramount importance,” Tiger wrote to investors.

(Updates with fee details in third paragraph.)

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