Coatue's newest fund lost money in the fourth quarter, showing how even the best-pedigreed quants are struggling
Coatue, billionaire Philippe Laffont's firm, opened a quant fund last May to outside investors even as many larger quant funds were struggling in an increasingly competitive space. In the hyper-competitive space of quant funds, where the biggest managers like Two Sigma, D.E. Shaw, and Renaissance Technologies are investing more every year into new data streams and artificial intelligence, new players face an uphill battle. The fund, which sources say is closed, runs roughly $350 million now, and returned just under 2% in its first eight months of trading. In the fourth quarter of last year, the fund returned -1.2%. Visit Business Insider's homepage for more stories.
The first stretch of trading for Coatue's nascent quant fund hasn't seen much upside. In the hyper-competitive space of quant funds, where the biggest managers like Two Sigma, D.E. Shaw, and Renaissance Technologies are investing more every year into new data streams and artificial intelligence, new players face an uphill battle. But Coatue's decades-long track record as a fundamental investor gave the new fund serious legitimacy. The fund, which began trading at the beginning of May, returned just under 2% for the year, and lost money — dropping 1.2% — in the fourth quarter, according to a document with performance numbers for the end of 2019 from one of the fund's investors seen by Business Insider. The fund, which runs roughly $350 million and is closed to other investors, was originally hoping to raise $250 million, according to a Bloomberg piece last year, and is marketed as a mix of fundamental stock-picking Coatue is known for, and quant-fund-like data analysis. In a difficult fund-raising environment, the fact Laffont was able to raise more than the firm was originally seeking shows how respected Coatue is — and how excited investors were for the new fund. "We envision a future where our data scientists and fundamental analysts sit side by side to formulate strong investment theses that are validated by data science," billionaire Coatue founder Philippe Laffont reportedly wrote to investors last year. Coatue is a part of billionaire hedge-fund founder Julian Robertson's network, and is known as a Tiger Cub because Laffont worked for Robertson. The firm declined to comment when asked about its performance. Fellow Tiger Cub Maverick Capital also struggled to produce returns in its quant funds last year, losing money while the leveraged version of its fundamentally run flagship fund beat the surging stock market last year. Maverick also declined to comment on its quant products. Big-time traditional quant players struggled last year too, as WorldQuant and AQR both had large layoffs to start the year, and even Ray Dalio's Bridgewater failed to make money. Coatue's human-run flagship bested the average hedge fund last year, recording 10% returns after losing money in a tough 2018. The mixing of fundamental and quantitative techniques, called quantamental, has been a popular hedge for stock-picking managers looking to diversify their products, but not there have been some notable struggles. Balyasny, for instance, cut its 10-person quantamental team, known as Synthesis, last year after the group had only been trading for 12 months. SEE ALSO: We mapped 4 generations of Tiger Management's hedge fund descendants: here's the quarter-trillion-dollar web of cubs SEE ALSO: Maverick Capital's human stock pickers are shining, but quant strategies at Lee Ainslie's $8.8 billion fund are in the red and lagging their peers Join the conversation about this story » NOW WATCH: WeWork went from a $47 billion valuation to a failed IPO. Here's how the company makes money.
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