Top Performing Hedge Fund of 2022 (So Far)
Meet Mandeep Manku, the Managing Partner and Founder of Coltrane Asset Management. As of June 30, the hedge fund has a year-to-date (YTD) return of 223%.
Born in England, Manku’s investing journey began at an early age. In 2000, at 16 years, old, Manku warned of the looming financial crisis. In an investing magazine, he wrote:
“The key to safely defusing this situation will be difficult, for it would involve derating many obviously overvalued hi-tech companies, and sacrificing performance in the aid of sustainable share price growth.”
Still, friends say that Manku suffered losses, despite his own warning. This lesson influenced Manku to act on his intuitions with confidence.
After graduating with a Bachelors in Science in Economics and Philosophy from the London School of Economics, Manku entered the investment world as an investment analyst at Deutsche Bank. After a stint at Deutsche, Manku was picked up by Dan Loeb’s Third Point. Since its inception in 1996, Third Point’s flagship fund has returned an annualized gain of 14.3%.
Coltrane Asset Management
In 2012, Manku decided to head out on his own, forming Coltrane with less than $50 million in initial capital. Since then, the hedge fund has returned an annualized gain of 19%.
However, Coltrane has had a volatile past two years. In late 2020, Manku surveyed the market and decided that too many tech names were trading at absurd valuations.
In a September 2020 presentation, he pointed out that many low-quality companies were trading at over 10x revenue, which “always ends poorly for investors.” Manku noticed that several special purpose acquisition companies (SPACs) were having trouble raising capital as well.
In addition, Manku didn’t believe the hype around the metaverse, noting that it may be a concept to help value companies at higher multiples. On top of all of this, insiders were selling out en masse.
Something wasn’t right.
Manku decided to take short positions in several high-multiple tech companies, such as:
- Peleton $PTON
- Netflix $NFLX
- Rivian $RIVN
- Meta Platforms $META
- Roblox $RBLX
- Carvana $CVNA
Coltrane was way too early to the party. By the end of 2020, the fund posted a massive loss of 56%. At this point, the poor returns were getting to Manku, who frequently took long runs to alleviate the stress. During one run, he accidentally ran the equivalent of a marathon.
Coltrane recovered some losses during 2021, posting a return of 19%.
By January of 2022, the fund’s assets under management shrank to under $200 million. At its peak, Coltrane had managed more than $1 billion.
Investors are very familiar with what happened next. YTD, the S&P 500 is down about 17%, while the Nasdaq Composite is down about 25%.
Meanwhile, Coltrane stayed put with its short positions and even increased them throughout the two years. According to a person familiar with the fund, its short on Carvana has contributed about 9% of its 223% YTD gains. Shares of CVNA are down about 90% YTD.
Read the complete piece here: https://hedgevision.substack.com/p/top-performing-hedge-fund-of-2022