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Hedge fund Aravt Global is shutting down after bets on high-flying growth stocks unraveled, report says

·2 min read
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iStock; Vicky Leta/Insider
  • Aravt Global is closing after a slew of recent losses on growth stocks like PayPal and GitLab, according to a WSJ report.

  • The hedge fund lost 8.5% last year, and has had double-digit losses to start 2022.

  • The growth-trade strategy that investors found success in over recent years is faltering, and better-than-average returns have slowed.

Hedge fund Aravt Global is closing down after big bets on growth stocks like PayPal and GitLab turned sour, according to the Wall Street Journal.

The firm — which prioritized investments in companies that would post regular, above-average growth — lost 8.5% last year, and was already down by double digits so far in 2022, the report said. And from its start to 2018, Aravt Global averaged lower than 2% per year of investment gains.

"When we launched in 2014, I made a promise to return capital if I ever lost conviction in our ability to deliver superior absolute returns sustainably," wrote founder Yen Liow in a February letter that was seen by the WSJ. "I believe our flagship long/short equity strategy has reached that point."

The growth-stock trade previously proved successful as investors piled into companies with more potential than profits, helped by easy-money policies from central banks.

But that began to unravel as the easing of pandemic-related restriction shifted momentum toward more established "reopening" stocks and away from growth stocks.

The Fed's hawkish pivot recently also hit growth stocks, and Russia's invasion of Ukraine has slammed tech shares especially hard as investors seek safe havens. In fact, the tech-heavy Nasdaq is down nearly 18% so far this year.

Aravt isn't the only hedge fund to sustain big hits, though others have more capital with which to weather the storm. To start this year, hedge funds Melvin Capital, D1, Tiger Global, and others have had a rocky start amid the brutal growth sell-off.

Read the original article on Business Insider