The Struggles of Big-Name Hedge Funds: A Month of Pain
The world of hedge funds has been hit hard recently, with big-name firms like Millennium, Point72, and Schonfeld all reporting losses. These firms, known for their ability to navigate even the toughest market conditions, are now struggling to deal with the volatility that has gripped nearly every sector. The losses are significant, with AppLovin, a stock favored by Tiger Cubs like Viking Global, Coatue, and Lone Pine, down more than 50% from its mid-February high. The situation has left many managers and investors scrambling to understand what’s going on and how to respond.
The Big Firms: A Rough Start to March
March has been particularly brutal for large multistrategy firms, with Millennium and Point72 each down 1.4% for the month through last Thursday. Schonfeld, which was flat in February, has also lost 1.2% this month through last week’s end. These losses come as momentum-linked trades, such as index rebalance strategies, continue to unwind, and stocks fall across the board. The pain is industry-wide, with even the brightest spots among big-name multistrategy firms having a rough start to March. The managers involved have declined to comment, but people close to these firms say the struggles are real and widespread.
Markets Still Richly Valued: The Stage is Set for More Pain
Despite the recent losses, markets remain richly valued, and many experts believe there could be more pain on the way. Man Group, a London-based manager, recently wrote that while it may feel like we are at an inflection point, “The fat lady may not have sung yet. But be under no illusion: the stage is set.” This bearish sentiment is shared by many, with one of the biggest losers among large-cap stocks being AppLovin, which has plummeted more than 50% since its mid-February high. It’s unclear if the Tiger Cubs were able to sell any or all of their stakes before the drop, but their silence on the matter speaks volumes.
The Role of Politics: Trump’s Impact on Markets
The current market volatility can, in part, be traced back to President Donald Trump and his administration’s policies, particularly on trade. While markets were initially exuberant following Trump’s election, with Wall Street believing his administration would cut regulation but not follow through with tariff threats, the reality has been much different. As consumer confidence dips and geopolitical tensions rise, markets have begun to turn. Even supporters of the president, like billionaire Third Point founder Dan Loeb, are acknowledging that the markets under the current administration will be, at the very least, volatile. Loeb recently posted on X, “We are born alone; we die alone and we navigate the Trump stock market alone,” in a twist on the well-known Orson Welles quote.
A Rough Year for Tiger Cubs: AppLovin’s Plunge
AppLovin, a favorite stock of Tiger Cubs like Viking Global, Coatue, and Lone Pine at the start of the quarter, has been one of the biggest losers among large-cap stocks in recent weeks. The stock is down more than 50% from its mid-February high, leaving many to wonder if these funds were able to sell any or all of their stakes before the drop. Lone Pine and Viking declined to comment, while Coatue did not respond to immediate requests for comment. The situation highlights the challenges even the best-known and most successful hedge funds are facing in the current market environment.
A Bleak Outlook: The Need for a Hug
The situation is so dire that Benn Eifert, the cofounder of QVR Advisors, which runs volatility and derivatives strategies, recently wrote on X, “If you see a long/short equity p.m. today give them a hug, they need it.” Through the end of last week, the S&P 500 had fallen more than 3%, and the index lost another 2.7% on Monday in the worst trading day of the year. Given the bearish attitudes and “sky-high valuations” in the stock market, it’s clear that the pain is far from over. For now, all anyone can do is brace for impact and hope that things start to turn around soon.
