Robert Citrone kept his pledge.
The Tiger Cub slashed Discovery Capital Management’s exposure and is now net short U.S. equities and long 10 percent at the portfolio level, according to his February monthly report, dated March 7 and seen by Institutional Investor.
II previously reported that Citrone halved his net equity exposure at the end of January, to 25 percent from a peak of 50 percent at year-end, “with the goal to get flat to short in the coming weeks primarily in developed markets.”
In the February report, he stated, “In anticipation of volatility once Trump took office, and concerns on sticky inflation and valuations, I am following my road map, which was to reduce our U.S. equity exposure.” Citrone added, “We may be on the verge of a broader market correction, likely to impact the U.S. most. Given this, I believe that my long positions in emerging markets, driven by idiosyncratic catalysts, are well-positioned and will be a diversifier to our returns.”
The report was sent to clients amid the stock market’s broad sell-off, which accelerated on Monday. Citrone also said he expects the repricing of AI-related valuations to continue, which will further impact stocks: “As previously noted, I view Deep Seek as a significant threat that will meaningfully impact capex and multiples in the space, creating compelling opportunities both long and short.”
Discovery is a combination macro fund and fundamental equity investor. It generally has a sizable exposure to emerging markets. It put together one of the best two-year returns in 2023 and 2024, posting gains of 48 and 52.7 percent, respectively.
So far this year, Discovery is down 1.39 percent after losing 4.35 percent in February. Citrone said February’s losses were driven mostly by equity long positions in the U.S. and Argentina and exposure to Latin American currencies, particularly in Argentina and Brazil.
The biggest winners for the month were short positions in Japanese equities and long positions in Nigeria and Venezuela. Looking ahead, Citrone said that emerging markets remain Discovery’s largest long exposure, particularly in Latin America, Nigeria, and Turkey.
He stressed that although Argentina — a favorite play for several years — has experienced some profit-taking in 2025, “my recent trip there has reinforced my confidence in [President Javier] Milei and his strong local support. I see an IMF agreement and successful midterm elections in October as key catalysts ahead.”
In Europe, Citrone said, the firm is taking “tactical advantage of favorable valuations” and an “expected ceasefire” in the Russia-Ukraine war, “which is shaping key opportunities.”
He also told clients he remains skeptical of a fundamental shift in China as long as Xi Jinping is in power. Even so, Citrone “tactically reduced” short positions because of relative valuations and optimism surrounding newly announced spending measures. “That said, I believe these measures fall short of addressing the underlying deflationary pressures and the overleveraged property market,” he noted.
On the short side, Citrone is betting against the U.S. through select equity structural shorts in financials, health care, TMT, and consumers. Discovery is also net short the U.S. dollar primarily against Turkey, Japan, and Brazil.
In China-related themes, it “greatly reduced” its short positions in currencies in China, equities and currency in Hong Kong, and currencies in Taiwan. Discovery is also short in Europe, primarily through index exposure to subordinated bank debt, and in Japan across select equities and rates.
In the long book, the fund’s Latin America longs are “anchored” in Argentina through equities and sovereign bonds, both dollar- and peso-denominated, as well as in Mexico’s equities, Brazil’s currency and some rates, and a small exposure to Venezuela. Discovery is also long equities and bonds in Peru and Ecuador in general.
In the U.S., long positions are in select financials, industrials, TMT, materials, energy, and corporate credit.
Finally, Discovery is long Nigeria across credit and currencies and long Turkey across currencies and equities.
