Why Skye Global’s Longtime Investors Are Cheering

The hedge fund headed by Jamie Sterne reached its high-water mark after posting a gain in June.

Illustration by II

Illustration by II

Skye Global Management has finally returned to its high-water mark. The hedge fund headed by Jamie Sterne reached that coveted level when it posted a 4.6 percent gain for June. As a result, it was up 21.3 percent in the first half of the year, according to an investor. Skye declined to comment.

This is quite a feat given that the fund lost 47.4 percent in 2022, the only black mark in its eight-year history. But it came roaring back in 2023, generating a 64 percent return. This was only Skye’s third-best year ever.

Sterne favors what he likes to call “best in breed” companies. A regulatory filing reveals that the firm seeks to make long-term investments in what he believes are structurally superior businesses with untapped pricing power and limited exposure to macroeconomic and political risks.

Sterne has traditionally run a highly concentrated portfolio. Several years ago, three stocks accounted for the bulk of assets. Now just one plays an outsize role. Amazon accounted for 47 percent of assets at the end of the first quarter. The stock surged about 27 percent in the first half, a signal that the rest of the portfolio cost the fund a few points of performance.

In the first quarter, Skye cut its stake in No. 2 long Microsoft by nearly one-third, reducing the stock’s share of the U.S. portfolio to 8.76 percent of assets, compared to 14 percent at year-end. Shares of Microsoft were up 6.2 percent in the second quarter. Skye also boosted its stake in Apple by about 600 percent, making the iPhone and iPad maker its fourth-largest long position, accounting for 6.25 percent of assets.

Sterne had good timing. Apple jumped nearly 23 percent in the second quarter. Hedge fund observers are watching to see if Skye further increases this stake in the second quarter and whether Apple attains major-position status when the firm files its second-quarter 13F document in mid-August.

Altogether, Skye held 31 different U.S. stocks at the end of the first quarter. They included ten new positions, none of which became top-ten holdings. As recently as year-end 2022, Skye held just 19 different stocks, and Amazon and Microsoft combined to account for more than 80 percent of assets.

Sterne was an II Hedge Fund Rising Star in 2018. He previously worked as an equity analyst at Dan Loeb’s Third Point, with a focus on the consumer, industrial, and health care sectors. He began his career as an equity research analyst at Maverick Capital, led by Tiger Cub Lee Ainslie III. That makes Sterne a Tiger Grandcub.

Skye was managing about $6 billion at year-end 2021, according to a regulatory filing. That was quadruple the $1.5 billion it was managing at the end of February 2020, according to earlier filings. But by year-end 2022, that figure had shriveled to $3.1 billion. It rebounded to $3.66 billion at year-end 2023.