Lone Pine Capital posted a 5 percent gain in its long-short fund, Lone Cypress, in the third quarter, bringing its total increase for the year to about 23 percent, according to an investor. Lone Cascade, its long-only fund, was up 8 percent in the quarter and 25 percent for the year.
The Tiger Cub founded by Stephen Mandel Jr. has now wiped out all of the losses it incurred several years ago. However, it remains well below its high-water mark thanks to a modified plan that it pioneered a number of years ago. Mandel no longer runs Lone Pine’s funds on a day-to-day basis, but his presence is apparent at the hedge fund firm’s Connecticut offices.
Lone Cypress dropped into the red in the fourth quarter of 2021 when it lost about 12 percent for the period, finishing the year down 7 percent. Lone Cascade was down about 10 percent in the same quarter but up 1 percent for the year. Then in 2022, Lone Cypress declined by 36 percent for the year and Lone Cascade was down 42 percent amid the wider equity bear market. Lone Pine rebounded with the broader market in 2023; Lone Cypress gained 19 percent and Lone Cascade surged 32 percent.
The firm currently manages about $17 billion, a little more than half the $31 billion it was managing at the end of 2020. Its U.S. portfolio emphasizes the Magnificent Seven stocks as well as beneficiaries of artificial intelligence.
At the end of the second quarter, its largest long, accounting for about 8.5 percent of assets, was Taiwan Semiconductor Manufacturing, the largest contract semiconductor manufacturer that gets a big chunk of its business from AI chip giant Nvidia, which Lone Pine does not own.
Lone Pine’s next three longs, responsible for a total of 20 percent of assets, were Microsoft, Amazon, and Facebook parent Meta Platforms.
Non-tech-oriented companies among the top-ten holdings include Philip Morris; KKR; and Vistra Corp., a retail electricity and power generation company that is one of the stock market’s top performers this year.
Under the modified plan, instead of needing to wait until it recovers all of its losses before being able to charge a performance fee, a fund can continue to charge half its performance fee. But it must wait until it recovers 200 percent of its loss before it returns to charging the full fee.
The rationale behind these arrangements is to allow a fund to retain talent by being able to pay top employees.