It appears that enough time has passed since 2022’s disastrous run for hedge-fund backers to finally trust long-short equity managers again.
Last quarter, stockpicking hedge funds raised a net total of $22.8 billion — the most of any strategy subset — in their first quarter without net outflows since 2022, according to a new report from Nasdaq’s eVestment. The haul made up the vast majority of the $27.6 billion in net flows that came into the $5.7 trillion industry in the first quarter.
Three years ago, big names like Tiger Global, Coatue, and Lone Pine suffered serious drawdowns while Gabe Plotkin closed his once-high-flying Melvin Capital. These managers were heavily exposed to the world’s biggest tech stocks and stung as inflation and interest rates increased, sending fast-growing names into a tailspin and allocators surging toward multistrategy firms like Millennium, Citadel, and Point72.
As the markets are rattled by President Donald Trump’s tariffs and the biggest multistrategy funds are closed to new capital, stockpickers are seen as a smart bet. The report states that these funds were flat in the first quarter while major stock indexes were down.
“While Q2 performance is still an open question, based on Q1 performance results, we speculate that equity managers were relatively well positioned heading into the quarter,” the report states. Industry data tracker PivotalPath’s global long-short index states that stockpicking funds were up 4.7% in May and more than 6% for the quarter so far.
Some of the biggest long-short managers have acknowledged the mistakes of 2022 and worked to change their approach.
Lone Pine co-CIO Kelly Granat said on a podcast earlier this year that the firm “lost balance” in its portfolio and had to reset after a 38% drop in 2022 in its long-short fund. Billionaire Chase Coleman’s Tiger Global recently wrote to investors that the firm incorporated “enhanced risk management processes” that include stress tests of each position after its 2022 56% dip.
The results for both Tiger Cubs — which are firms connected to Tiger Management, the onetime industry standard founded by late billionaire Julian Robertson — as well as other long-short equity funds the last two-plus years have convinced allocators to come back, though the first quarter’s fundraising haul won’t replace all the capital that’s left.
The report states that a net total of $83.8 billion left stockpicking funds over the last nine quarters.
