After the strong appreciation of the US dollar for four consecutive years, Tiger Science and Technology Fund predicted that the overvaluation of the US dollar against the European currency and the Japanese yen would depreciate, and bought a large number of foreign currency call options, and obtained high returns. In the early days of Tiger Science and Technology Fund management, traditional stock selection was an investment strategy. In the middle and late 1980s, with the financial innovation and the introduction of more and more financial derivatives, Tiger Science and Technology Fund Management increasingly deviated from the traditional fund management strategy, and established a derivative portfolio including national debt, currency, stock market, interest rate and related option futures around the world, becoming a typical "macro" hedge fund. Tiger Science and Technology Fund has maintained brilliant achievements. From 1980 to1August 1998 before the investment failure, the annual return on investment was 32%. Even if the investment failure of 18 months was included, its annual growth rate was as high as 25%, making it one of the best hedge funds. The decline of Tiger Science and Technology Fund Management can be traced. First, in the autumn of 1998, due to the devaluation of the Russian ruble, it lost $600 million. Compared with other hedge funds such as LTCM, its losses are not great, especially the Tiger Science and Technology Fund is in its heyday, with losses of hundreds of millions of dollars and limited impact. Secondly, engage in yen speculation, that is, borrow low-interest yen to buy dollar assets, in order to profit from the turmoil in Asian financial markets; However, contrary to expectations, the yen suddenly strengthened in the fourth quarter of 1998, disrupting the deployment of hedge funds to invest in yen, and the management of Tiger Science and Technology Fund eroded billions of dollars. Since then, investors began to redeem their funds, which greatly damaged their vitality.
Yen speculation and the loss of ruble debt are not fatal to Tiger Science and Technology Fund with US$ 22 billion, although this is its first performance retrogression in 18, and the performance ratio of 1998 has dropped by 4%. The real reason for the decline of Tiger Science and Technology Fund management is its stock investment mistakes. Like many hedge funds, Tiger Technology Fund Management Company turned to the stock market after the global "macro" investment failed one after another. When investing in stocks, Robertson has been adhering to the concept of "value investment", determining reasonable prices according to the company's profitability, absorbing on dips and shipping at high prices.
However, when the financial market entered 1999, there was a whirlwind of technology stocks. In the "new economy" dominated by science and technology stocks, the stock fluctuation is not completely operated according to the basic analysis mode, and the "value method" can hardly be used for the analysis of science and technology stocks. Robertson bought a large number of "old economy" stocks at low prices, and these stocks continued to plummet due to the inflow of market funds into "new economy" stocks. For example, American Airlines, which holds more than 22% of the shares, lost nearly 50% of its market value in the past 12 months, and the management of Tiger Science and Technology Fund suffered heavy losses. The assets per share of Tiger Science and Technology Fund dropped from the peak of1540,000 to $820,000 at the end of February. Tiger Technology Fund, as a hedge fund, manages to use leverage to buy short-selling stocks and short-selling stocks. It is natural for Robertson to short the unprofitable technology network stocks. He shorted two active stock, Lucent Technology and Chipscreen Technology. It is conceivable that these transactions have brought much disaster to Tiger Science and Technology Fund. Since then, forced by the situation, Tiger Science and Technology Fund Management began to catch up with 1999' s "new economy" stocks, and successively absorbed Intel and Dell Computer. And took over the high-level distribution of goods, resulting in "buying high and selling low" and losing another hand in technology stocks.
Due to repeated mistakes in stock market investment decisions, the assets managed by Tiger Science and Technology Fund fell by 19% in199, and fell by 13% by the end of February 2000. In addition, investors have redeemed their capital. Since September 1998, the assets managed by Tiger Science and Technology Fund have plummeted1600 million USD. Due to the serious losses, the assets managed by Tiger Science and Technology Fund can no longer provide enough commissions and share profits to pay operating expenses and employees' salaries. Unlike mutual funds, hedge funds are paid from management fees, but 20% of the profits realized by the fund are paid. The clients managed by Tiger Science and Technology Fund are either rich or expensive. They are willing to pay a high price to encourage the fund to outperform the market, but only pay the commission to the fund when the investment income must exceed a certain level. In the case of loss management of Tiger Science and Technology Fund, in order to get commission, the return rate of the fund must rebound by nearly 50%, but this is almost impossible, and the fund is constantly redeemed, so that even the final management fee is not enough to cover the general operating expenses.