Billionaire Chase Coleman's Tiger Global Management is stressing patience when it comes to the $25 billion investment firm's Chinese stock holdings. Chinese stocks have formed an important component of Tiger Global's massive 13F portfolio for many years, and accounted for 20% of the firm's long exposure in both its long-short and long-only funds this year. However, those stocks have struggled mightily in 2018.
In its third-quarter investor letter, Tiger Global noted that many of its biggest losers this year have been Chinese stocks, including JD.Com Inc (ADR) (NASDAQ:JD), Alibaba Group Holding Ltd (NYSE:BABA), New Oriental Education & Technology Group Inc. (NYSE:EDU), and TAL Education Group (NYSE:TAL), all of which ranked among Tiger Global's top 20 holdings as of June 30. Those four stocks have suffered average losses of 34% in 2018, paced by JD.com's ugly 51.5% losses.
Chinese stocks have been battered to the tune of 17% declines for the Hang Seng and 21% losses for the Shanghai Composite this year. Among other things, investors are concerned about the overall state of the Chinese economy, including rising debt, as well as the ongoing trade war between China and the U.S that has dominated headlines for much of the year. JPMorgan estimated last month that a full-blown trade war would shrink China's economy by 1%.
Tiger Global stated that China is a leader in innovation and boasts one of the most advanced internet markets in the world and that the recent swoon in Chinese stocks hasn't changed its opinion on the long-term potential of the market. It is far from the only firm to feel that way; as we reported last month, the Trade War Couldn’t Stop Hedge Funds From Buying These Chinese Stocks in full force during Q2, including Alibaba, Baidu Inc (NASDAQ:BIDU), Momo Inc (NASDAQ:MOMO), and Ctrip.Com International Ltd (NASDAQ:CTRP).
Tiger Global also noted that many of those struggling Chinese stocks are coming off of hugely successful 2017 campaigns, including TAL Education Group (NYSE:TAL), which returned an exceptional 155% last year, while Alibaba Group Holding Ltd (NYSE:BABA) was up by 96% and JD.Com Inc (ADR) (NASDAQ:JD) gained 63%. Thus, the firm believes that its investors should maintain a balanced perspective on the volatility, which it described as nothing new.
The investment firm is certainly deserving of a little patience and perspective from its investors, who have enjoyed some of the best returns in the hedge fund world since its 2001 founding. Tiger Global has delivered annualized returns of over 20% since then, including 28% returns in 2017. And despite those struggling Chinese stocks and the October bear market, its long-short fund was still up by over 7% in 2018, beating the market.
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Tiger Global has scored big on several investments through its venture capital funds in recent years, including a projected $3 billion payday for 75% of its stake in Flipkart after the Indian e-commerce company was sold to Wal-Mart Stores, Inc. (NYSE:WMT) for $16 billion in May. Another of Tiger Global's venture projects was an early investment in Glassdoor, which was sold for $1.2 billion earlier this year to Japanese company Recruit Holdings.