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

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NEW YORK, Sept 15 (Reuters) – U.S. hedge funds that focus broadly on technology investments are bracing for big losses this year, as gloomier economic data sparked a further sell-off this week, lowering earnings. hopes of regaining significant ground in the coming months.

For fund managers, including those gathered at one of the industry’s largest conferences in New York, any optimism from last week’s market rally was undermined by a further blow on Tuesday when the S&P 500 (.SPX) it slipped 4.3%. Many funds were already sitting on declines of 30% or more.

Speakers at a state-of-the-industry panel at the SALT New York 2022 conference urged investors to keep their bets, arguing that the recession could turn into a money-making opportunity.

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But offstage, the mood was darker.

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

Even before this week’s drop, funds that bet on tech and healthcare stocks were feeling the pain. Whale Rock Capital Management LLC’s main fund is down 38% through August, while HMI Capital Management is down 39% in the first eight months of the year. Casdin Capital lost 50% and SoMa Partners 31%.

Other prominent fund managers, including some started by the recently deceased Julian Robertson, who is credited with helping pioneer making money when stocks crash, are also in the red. Coatue Management lost 17% in the first eight months of the year, while Maverick Capital lost 27% through August.

Fund representatives declined to comment.

“I’ve been through 9 bear markets and they absolutely suck,” said Anthony Scaramucci, managing partner at investment firm SkyBridge Capital and founder of the three-day SALT conference.

The broader S&P 500 index fell 17% through August, while the average hedge fund fell 4% through August according to Hedge Fund Research (HFR). The HFR Healthcare and Technology Index is down about 15%.

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

For many of these funds, this year’s losses come after a series of strong returns fueled by a decade-long bull market, investors and fund managers said.

And not all hedge funds are doing poorly this year.

Citadel reported that its Wellington fund returned 3.74% in August, bringing its YTD yield to 25.75%. DE Shaw, in his Composite fund, reported a 20% return to investors. Representatives for the firms declined to comment.

At the SALT conference, the low returns were top of mind as the focus of the conference also shifted from hedge funds to cryptocurrency investments. Many of the notable investors who appeared over the years, including Steven A. Cohen, Daniel Loeb and Ray Dalio, were absent. The private concerts and poolside parties that featured when the conference was held at the Bellagio in Las Vegas have been 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 optics of paying thousands of dollars for a ticket at a time when investors were pulling capital out of their companies.

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

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Information from Svea Herbst-Bayliss and Carolina Mandl; edited by Richard Pullin

Our standards: The Thomson Reuters Trust Principles.

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