Hedge fund fell 84% on leveraged tech bets: WSJ

  • Marcho Partners lost around 84% in the first half of 2022, according to a Wall Street Journal report.
  • The large losses stem from the company’s leveraged bets on tech names such as Shopify, Spotify and Cazoo.
  • The losses far exceed the 20% drop in the S&P 500 over the same period.

Tech-heavy hedge fund Marcho Partners saw an 84% drop in the first half of 2022, according to a the wall street journal report.

The company, launched by Carl Anderson in 2019, was up 146% in 2020 during the pandemic bull market.

Initially, Anderson’s team chose software and internet companies, including Spotify, Shopify and Unity Software. The company would only bet on a small number of names, but then raise the stakes with leverage – about $1 for every dollar invested, in June 2022, according to the Journal.

This strategy worked when the Fed responded to COVID-19 with huge amounts of fiscal stimulus. Marcho Partners made significant gains and its assets under management grew from $150 million to over $1 billion at its peak.

However, 2021 turned out to be different. The company saw a 13% drop on the year after increasing its bets on tech names as they slumped in 2022.

In January 2022, according to the Journal report, the company’s losses reached 36% and continued to accumulate each month until June.

Shopify, one of Marcho’s largest holdings, fell 77% in the first half of this year, weighing on the hedge fund’s portfolio. Cazoo, which surged during the pandemic, slumped as Marcho’s shares in the European car dealership fell from $125 million at the start of the year to $15 million as of June 30.

In the first half of 2022, the S&P 500 fell about 20% and the average stock-picking hedge fund lost 12%, reports data firm HFR.

Marcho Partners’ losses were larger than those of Cathie Wood’s flagship Ark Innovation ETF, which fell nearly 60% in the same sequence.