This content is from: Portfolio
How Chase Coleman Became a Hedge Fund Legend
In a letter obtained by II, the Tiger Global founder and his team look back on what they did right — and what they would’ve done differently.
Twenty years after launching a hedge fund firm with a seed investment from legendary hedge fund manager Julian Robertson, Jr., Chase Coleman is taking a well-deserved victory lap.
The elite investment manager, who never speaks with the press or at conferences, recently sent off a six-page 20-year anniversary letter to clients, which was obtained by Institutional Investor. The letter recalled Tiger Global’s unlikely launch, reflected on past accomplishments and mistakes, and envisioned the next 20 years — all in a sober, non-boastful tone.
And who can blame him?
At 45 years old, Coleman is considered not only one of the best hedge fund managers of his generation but, perhaps more significantly, a member of a very small elite group of Tiger Cubs — managers who previously worked for Robertson’s Tiger Management — with legends like Stephen Mandel, Jr., John Griffin, O. Andreas Halvorsen, Philippe Laffont, and Lee Ainslie, III.
His firm Tiger Global Management — also headed by Scott Shleifer, 43, who joined back in 2002 and runs the long-only fund and private equity business — currently manages roughly $50 billion and more than 100 employees.
Tiger Global Investments, the firm’s flagship long-short fund, has compounded at 21 percent on a net basis for 20 years. An investment in the fund at inception would have grown 43 times net of fees over the last two decades, compared to a growth rate of five times for an investment in the S&P 500 index over the same period.
The firm’s long-only fund, Tiger Global Long Opportunities, has compounded at 22 percent net since its October 2013 launch.
And the firm’s private equity business has generated a 33 percent gross fund internal rate of return and a 26 percent net IRR.
In 2020, Tiger Global earned its investors $10.4 billion, more than any other hedge fund on the annual list of the top 20 managers compiled by London fund-of-funds firm LCH Investments.
Not surprisingly, both Coleman (with $2.5 billion in personal earnings) and Shleifer (with $1.5 billion) ranked among the top ten on this year’s Rich List.
All this despite the fact that — as the anniversary letter concedes — March 2001 was not exactly a great time to launch a technology-oriented hedge fund.
Coleman was just 25 with just a few years of experience working as an analyst at Tiger Management. Yet Robertson, his mentor, thought enough of Coleman to provide him with capital, support from his back office and trading infrastructure, and access to his friends. Coleman was among a half dozen or so managers the Tiger Management founder chose to seed less than two years after shuttering his once celebrated hedge fund, as detailed in a December 2002 Institutional Investor cover story.
“I don't much believe in tech,” Robertson said in a fall 2002 interview. “It is not the place to be.” But Robertson seeded Coleman’s tech-oriented strategy anyway, with II reporting that “many observers deem Coleman the star among the young cubs.”
Sure enough, none of the other funds currently exist.
[II Deep Dive: Inside the Seeding Strategy of Julian Robertson’s Tiger Management]
The letter noted that Tiger Global — then called Tiger Technology — launched just after the dot-com bubble burst. “It did not seem like the opportune time to start a firm initially dubbed Tiger Technology,” stated the letter, which was signed by the Tiger Global team, and not Coleman. “But it was our chance and we were determined to make the most of it.”
According to the letter, Coleman drew on several of Robertson’s core philosophies, such as to buy the best companies and short the worst, “seeking to identify high-quality businesses levered to the most important secular growth trends while shorting poorly positioned companies on the wrong side of change.”
Some prospective investors took them seriously and some didn’t, the firm said.
But Tiger Global got off to a sizzling start and never looked back, “with the bulk of the profits from shorts and solid stock selection on the long side,” according to the letter.
Tiger Global credited its early success in part to Shleifer embracing three Chinese internet companies in late 2002: Sina Corp., Sohu.com, and NetEase. Dubbed the “Yahoos of China,” all of them appreciated by several multiples by mid-2003.
After the Tiger Global team realized that many of the companies they were excited about were private, the firm launched its first private fund in January 2004. Today, the private equity business accounts for roughly half the firm’s assets.
“We are grateful to have begun our investment careers at a time when the internet era was just beginning,” the firm said in the letter. “Inexperience may have been an asset when it came to imagining what a new internet-connected world could look like, and our research indicated that market leaders could achieve very high returns on capital.”
Tiger Global also admitted to mistakes over the last 20 years, such as embracing banks and other cyclical stocks during the 2008 financial crisis.
The firm likewise lamented passing on early market-leading companies for valuation and other reasons, such as Alibaba Group Holding, as well as those it sold too early, such as Facebook, Peloton, LinkedIn, Amazon, and Netflix.
These days, Tiger Global mostly focuses on consumer, enterprise, and financial technology in the U.S., China, and India, areas the firm said “remain in the early innings as the defining economic themes of our generation.”
“Over the course of our careers, we have seen successive generations of technology improvements lay the groundwork for future change, and we believe this trend is accelerating,” the letter stated. “With a high degree of certainty, the future will see machine intelligence automate larger swathes of decision-making increasing efficiency and further embedding digital systems in our daily lives.”
In the letter, the Tiger Global team thanked Robertson for his confidence and enduring support and willingness to take a chance on Coleman and his team, crediting the mentor with providing a brand, advice, access to his friends, and for what it called the many “Julian-isms.”
Over the years, Robertson has impressed upon his professional descendants the importance of giving back, setting the example with his Robertson Foundation and the Tiger Foundation.
In the letter, Tiger Global announced it had created the Tiger Global Philanthropic Venture, initially committing $220 million to combat inequality and poverty. “The initiative formalizes an approach to decisions that incorporate environmental, social, and governance considerations, as well as philanthropic efforts that are already underway, including programs that encourage employees to give back through annual charitable donations and commitments to community-focused organizations,” the firm said.
In the past year, Tiger Global’s team has provided food, shelter and education in New York City “and beyond,” according to the letter.