Leveraged bets on tech stocks like Spotify and Shopify tanked a hedge fund that was up over 146% in 2020: report
- Marcho Partners lost roughly 84% in the first half of 2022, according to a Wall Street Journal report.
- The steep losses stemmed from the firm's leveraged bets on technology names like Shopify, Spotify, and Cazoo.
The technology-heavy hedge fund Marcho Partners saw an 84% decline through the first half of 2022, according to a Wall Street Journal report.
The firm, launched by Carl Anderson in 2019, had been up 146% in 2020 during the pandemic's bull market.
Initially, Anderson's team picked software and internet companies, including Spotify, Shopify, and Unity Software. The firm would only bet on a small number of names but then ramp up the stakes with leverage — about $1 for every dollar invested, as of June 2022, per the Journal.
That strategy worked as the Fed responded to COVID-19 with huge amounts of fiscal stimulus. Marcho Partners made hefty gains, and its assets under management ballooned from $150 million to over $1 billion at its peak.
However, 2021 turned out different. The firm saw a dip of 13% on the year after increasing its bets on the tech names while they faltered into 2022.
In January 2022, according to the Journal report, the firm's losses reached 36%, and continued to pile up every month until June.
Shopify, one of Marcho's largest holdings, dropped 77% through the first half of this year, which dragged on the hedge fund's portfolio. Cazoo, which surged during the pandemic, cratered as Marcho's shares in the European car dealer dropped from $125 million at the start of the year to $15 million as of June 30.
Through the first half of 2022, the S&P 500 dropped about 20%, and the average stock-picking hedge fund lost 12%, data company HFR reports.
Marcho Partners losses were deeper than Cathie Wood's flagship Ark Innovation ETF, which was down nearly 60% in the same stretch.