Cadian Capital Management suffered a sharp decline in September. The tech-focused hedge fund lost 10 percent last month and is now down 15 percent for the year, according to someone who has seen the results. It is on track to post its worst loss since 2021, when it dropped about 30 percent. This is no doubt a big disappointment for investors given that the tech-heavy Nasdaq has climbed more than 23 percent this year.
Cadian is one of a number of technology, media, and telecommunications hedge funds that have distinguished themselves in recent years by avoiding the most widely held and well-known tech, software, and internet names. This strategy enabled the firm to build an enviable performance record and avoid a sharp decline in 2022, losing less than 2 percent when the market plunged into bear territory and many tech-focused funds lost between 30 and 50 percent. Of course, Cadian’s 2021 loss was worse than those of most of the tech funds that were down that year.
Cadian was launched in 2007 by Eric Bannasch, who spent four years with Perry Capital as a managing partner and portfolio manager of the firm’s TMT practice. The TMT firm emphasizes smaller and midcap stocks that most tech investors overlook. None of its 29 U.S.-listed common stock long positions rank among the most widely held hedge fund stocks.
Few of the companies are household names, even among investors. Perhaps the most recognizable stock in the portfolio is health club chain Planet Fitness, which is an outlier among Cadian’s tech stock holdings. It was the firm’s largest long position in the first quarter but moved down to the third spot after the hedge fund cut the holding by 59 percent in the second quarter. The stock was flat in September and up 11 percent over the first nine months of the year.
Braze, the largest long position in the fund as of the end of the second quarter, played an outsize role in September’s performance. Braze fell about 28 percent after the company came up short on several key metrics in its second-quarter earnings report. Cadian had lifted its stake by 8 percent in the second quarter.
Criteo, which provides online display advertisements and is the seventh-largest long position, lost 15 percent last month — though it was still up 60 percent for the year.
Several of Cadian’s largest long positions were relatively flat in September but down sharply for the year. For example, No. 5 long Elastic, an American-Dutch company that provides self-managed and software as a service (SaaS) offerings, was essentially flat last month but has lost about 32 percent for the year. Remitly Global, a digital financial services company, dropped nearly 2 percent last month and is off by 31 percent for the year.
However, software company Varonis Systems, Cadian’s second-largest long position, didn’t move much in September but is up about 25 percent for the year.