Reals that London-based hedge fund TechBit is going wrong

Behind the exciting results: A hedged bet on a relatively small number of high-growth stocks that have fallen in value, such as Shopify Inc.

and British online used car retailer Cazoo Group Ltd

The fund did not respond to a request for comment, and a representative who answered the phone said company policy is not to comment to the media.

Hedge funds generally aim to avoid significant losses from the broader market by hedging their stock picks, typically by shorting against other stocks.

But as the tide recedes in the market, the losses of some technology-focused funds are surprisingly large. One of the biggest, Tiger Global Management, fell 50% in its flagship fund in the first half of the year, betting on companies including Carvana. Co.

and Shopify.

The company told investors it was disappointed by its own performance and was determined to recoup its losses.

The average stock-picking hedge fund lost 12% in the first half of the year, while the S&P 500, including dividends, is down more than 20%, according to data research firm HFR.

Marcho Partners’ performance was worse than some popular tech stock funds, such as Cathy Wood’s Main Arc Innovation ETF, as well as bitcoin. Both are down more than 57% in the first half of the year.

“The word ‘hedge’ in it shouldn’t simply be going down three to four times the stocks,” said Andrew Beer, founder of Dynamic Beta Investments, which manages funds that replicate hedge fund portfolios. “It’s an incredibly bad result.”

Marcho It was started in 2019 by Carl Anderson, who ran the hedge fund division of Mr Palihapitiya’s firm Social Capital. Mr. Anderson killed himself after Mr. Palihapitiya stopped taking foreign investments and wound up a hedge fund in the midst of a wave of startups in 2018.

A spokesman for Mr Palihapitiya declined to comment.

Mr Anderson set up a relatively small fund in London with the help of investors including a subsidiary of Belgian holding company Groupe Bruxelles Lambert. SA,

It grossed 150 million euros, which is about 150 million dollars. A spokesman for Groupe Bruxelles Lambert declined to comment.

Mr. Anderson has made bets on a variety of technology stocks, mostly software companies and online platforms, including Spotify Technology. on

and video game software maker Unity Software in 2010. Documents Marco presented to investors.

After central banks flooded the markets with money during the Covid-19 pandemic and growing optimism about the technology’s reach, Mr Andersen and his money reaped a windfall. In the year By the end of 2020, the fund was up 146 percent—a huge return for a hedge fund—and assets under management surpassed $1 billion.

In the year As prices rallied in 2021, the fund took its money into special-purpose buyout companies, including SPACs run by Mr. Palihapitiya. It also increased the amount of bets on software companies. Amid several bad months for SPACs and tech and a rocky second half of the year, the fund is down more than 13 percent in 2021.

In the year In 2022, the waters got even rougher. After falling 36 percent in January, the fund has lost money every month, including 20 percent in June.

Shares in Shopify,

Buy it 4.62%

One of its biggest holdings fell 77% in the first half of the year — a pain compounded by the fund buying more stocks earlier in the year and doubling its holdings. Another bet was Argentina-based e-commerce platform Mercado Libre, which fell 52 percent.

The fund’s biggest losses so far have been in the used car boom and bust in 2018. It was on Cazoo, which listed with a SPAC in 2021 at a valuation of $8 billion. While Kazu had previously forecast sales to be up for years, the losses are looming as earnings have been less robust than forecast and the pandemic has dampened car frustrations.

According to calculations from FactSet, Marcho’s shares in Kazu were It was at $15 million on June 30, down from $125 million earlier in the year..

Write to Eliot Brown at Eliot.Brown@wsj.com