U.S. technology-focused hedge funds brace for heavy losses amid market slide

NEW YORK, Sept 15 (Reuters) – U.S. Japanese funds, which focus broadly on technology investments, are poised for heavy losses this year, as bleak economic data this week prompted a fresh sell-off, dimming hopes of recovering any significant ground in coming months.

For fund managers, including those gathered at one of the industry’s biggest conferences in New York, any optimism about last week’s market rally was dashed with a fresh blow on Tuesday as the S&P 500 (.SPX) slid 4.3 percent. Many funds are already discounted by 30% or more.

At a forum on the state of the industry at the SALT New York 2022 conference, speakers urged investors to stick with their bets, arguing that the downturn could be an opportunity to make money.

But offstage, the mood was darker.

“It’s going to take a lot of work to get out of this hole,” said David Moon, managing director at Symmetric.io, which tracks hedge fund managers’ investments and returns.

Even before this week’s decline, funds betting on technology and health care stocks were feeling the pain. Well Rock Capital Management LLC’s flagship fund is down 38 percent through August, while HMI Capital Management is down 39 percent in the first eight months of the year. Cassidy Capital was off 50% and SoMa Partners was off 31%.

A few are also in the red, including those recently started by the late Julian Robertson, credited with helping pioneers make money when stocks fall. Coatue Management has lost 17% in the first eight months of the year, while Maverick Capital is down 27% through August.

Representatives for the fund declined to comment.

“I’ve been through 9 bear markets and they’re very attractive,” said Anthony Scaramucci, an investment partner at SkyBridge Capital and founder of the three-day SALT conference.

The broader S&P 500 index is down 17 percent through August, and the average hedge fund is down 4 percent through August, according to Hedge Fund Research (HFR). HFR’s technology and healthcare index fell 15 percent.

Goldman Sachs reported that hedge funds piled up on tech stocks again last week, making it the sector’s strongest buying in seven months.

This year’s losses for most of these funds come after strong returns fueled by a decade-long bull market, investors and fund managers said.

And not all hedge funds are doing well this year.

Citadel reports that the Wellington fund returned 3.74 percent in August, bringing the year to date to 25.75 percent. DE Shaw, in mutual funds, reported a 20% return to investors. Representatives for the companies declined to comment.

At the SALT conference, poor returns were top of mind as the conference’s focus shifted from hedge funds to crypto investments. Gone are many of the famous investors who have emerged over the years, including Steven A. Cohen, Daniel Loeb and Ray Dalio. The private concerts and pool parties seen at the Bellagio in Las Vegas were replaced by buffet lunches of pasta, tacos and salads at the cavernous Jacob K. Javits Convention Center in Manhattan.

Two hedge fund executives who skipped SALT this year told Reuters they were concerned about the prospect of paying thousands of dollars for tickets as investors pull capital out of their firms.

Greg Jensen, co-chief investment officer of Bridgewater Associates, one of the world’s largest hedge funds founded by Ray Dalio, echoed a more sanguine tone. He warned that financial markets had not fully priced in the prospect of a recession, just hours before the market fell on Tuesday and fell further on Wednesday.

Reporting by Svea Herbst-Bayliss and Carolina Mandl; Editing by Richard Pullin

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