The Tiger Cub Hedge Funds have continued their streak of outperformance even through 2016. Learn more in our latest article.
Despite a few high profile closures and some recent missteps, the clan of legendary investor Julian Roberston remains at the top of the investment world. In aggregate, the so-called Tiger Cubs control $150B in reported market value according to recent public filings with the SEC and other global regulators.
The hedge fund analyst in me is intrigued by the Cubs’ consistent skill and ability to preserve investment edge while growing aggregate assets. This curiosity is one of the reasons we track our list of Cubs in our free visualization, the Tiger Cub Overlap Matrix. Recently updated for the latest regulatory holdings release, the analysis shows where the managers are investing today and how some of them see opportunities in similar areas. We organize the set of managers in three groups:
- Cubs: managers that have worked directly with Roberston for at least two years
- Seeds: managers that were seeded by Roberston but have not worked at Tiger Management
- Grand Cubs: managers that have worked for either a Cub, a Seed, or another Grand Cub
In all, we currently track 46 separate entities, that’s down from 50 in 2014 as a result of several closures. If you know of any managers we missed or would like to see our list of new additions please let us know.
Tiger Cub Performance
While great overall, performance has been choppy in the first months of this year, judging by a market-value weighted portfolio of Tiger Cub public ownership. Year to date, their simulated performance trails the S&P 500 by more than 600bps. This underperformance is partially due to large losses in two stocks: Cheniere Energy, and Valeant Pharmaceuticals. Together, the two positions are responsible for 160bps of negative contribution. While the Cubs were not as badly hurt by VRX as some other managers, the crowded trade took a toll.
Biggest Trades Going into 2016
The top increased name for Q4 was Teva Pharmaceuticals as the Cubs more than doubled their bet on the Israeli pharmaceutical company that manufactures and sells generic pharma products.
The two healthcare specialists of the group, Deerfield (first Cub in the name) and Healthcor have both been invested in Teva before. In 2010 they had relatively small positions before closing them out. Last year they invested again, and this time a lot more Cubs follwed: Blue Ridge, Viking, Discovery, Bridger and Samlyn, among others, have all disclosed positions recently. Below is a price vs. quantity held chart for the entire group of Tiger Cubs. Note the the positive time-weighted return comapred to the cumulative loss in P&L that unfortunately aligns with the huge ramp up in quantity on 12/31/2015.
The stock has yet to reward managers, as it has thus far cost an estimated $348mm in P&L since 2007, but the bulk of the position has only recently been put on as we can see in the price vs. quantity chart above.
Managers also added to Priceline and Google and doubled their bet on Pfizer, the giant pharma company that acquired Allergan. Amazon, Netflix, and Allergan are currently their largest bets by market value.
Other Top Picks for 2016
Charter Communications became the most popular pick for the Cubs as of December’s filings. The impending TWC merger would create the second largest cable company, just behind Comcast. Of our group, 18 managers have disclosed over $3B aggregate in the name. It’s safe to assume they are betting on the deal’s approval and banking on the potential synergies Charter would enjoy after the mega merger. We estimate that so far, the group has made $1.72B on the name:
You can learn more about the group of managers and their recent bets in our free overlap visualization. Take the tutorial and let us know what you think of the analysis in the comments section.
What makes a good portfolio manager? Is it superior research and their feel for the markets? Or is it their ability to time trades and manage risk? Is it art or science? We think there are definite elements of gut and instinct in portfolio management but for the most part, we’re concerned with things we can measure. The decisions that PMs make must be quantified and analyzed. After all, whatever drives the PM’s investment process should ultimately translate into returns for investors.
In this report, we ranked the best portfolio managers in the world, and found 16 that, year after year, have landed in the first quartile for win/loss ratio and position sizing skill among all hedge funds. Analyzing data since 2008, these managers have proven their ability as they navigated through disparate market environments and survived massive alpha drawdowns.
What’s in the report?
- A ranking of the best portfolio managers
- Detailed analysis on the top five managers
- The top five positions for these managers entering 2016