An upside-down investing landscape requires an outside-the-box thinker.

For decades, asset managers have been able to stick to somewhat static definitions of what value and growth investments are, helping them categorize and hedge their investments.

But the investing world has become more and more detached from its old-school fundamentals. This year alone we've seen a single deli in New Jersey worth millions in the public markets and a video-game retailer becoming the center of Wall Street's attention when it nearly brought down a top hedge fund.

For stock investors nowadays, thinking about what the future looks like might be more important than the company's current performance. In essence, that means copying what Mala Gaonkar and Lone Pine have been doing for years. 

Gaonkar is one of the three-person team running $30 billion Lone Pine Capital, alongside Kelly Granat and David Craver, taking over the firm from the billionaire founder Stephen Mandel Jr., who retired at the beginning of 2019.

Gaonkar is the firm's expert on the bigger picture. The 51-year-old is less interested in a company's latest earnings release and more focused on what trends will be dominating the world in a couple of years' time, sources who have worked with her and invested in Greenwich-based Lone Pine told Insider. A great example comes from her appearance at last year's digital Milken Conference, where she walked through how Facebook — long thought to be the quintessential example of a growth company — should be considered a value play now.

The London-based Gaonkar develops her worldview not just from her time in the office with her team of analysts but outside of work as well, where she's funding arts projects, running public-health nonprofits, and creating interactive exhibits with the former Talking Heads frontman David Byrne.

Through interviews with past coworkers, investors, arts partners, industry experts, and more, Insider dived into what makes Gaonkar — a mother of two in an industry dominated by men and an Indian woman in an overwhelmingly white space — a trailblazer, from her investing prowess to her passion projects away from the office.

"In whatever field Mala's working, she asks interesting questions. Whatever she is looking at, she's thinking about in a broad way," said James Lingwood, the codirector of Artangel, where Gaonkar was formerly a trustee.

Lone Pine declined to make Gaonkar or other executives available for interviews for the piece.

Taking over for a legend

Gaonkar, who was born in the US but grew up in Bangalore, India, chose to study economics at Harvard despite coming "from a long line of rural Indian doctors."

"I was the family black sheep," she joked in a W Magazine profile from 2017.

After getting her bachelor's degree in 1991, she worked for Boston Consulting Group in the firm's Munich and Hong Kong offices before returning to Cambridge to get her MBA at Harvard. She graduated the same year as her husband, Oliver Haarmann, who is the founder of London-based private-equity firm Searchlight Capital, after working as a partner for KKR.

She then worked in private equity after her MBA as an analyst for Chase Capital Partners for two years before joining a young hedge fund run by one of Julian Robertson's former analysts in 1998.

While Tiger Global and Coatue might get more attention, Lone Pine has been the best-performing Tiger Cub of all time according to LCH Investments, which tracks historical hedge-fund returns. Since the fund's inception, it's returned $42.3 billion to its investors — the third most in history behind only Bridgewater and George Soros' now-closed fund.

Respect for Mandel — the investor and the person — is widespread; in a Barron's story on the billionaire's retirement, Robertson, Mandel's old boss, called him "one of the most competent analysts and best people on the planet."

Gaonkar, Granat, and Craver have filled the big shoes left by Mandel admirably, though, adjusting to the current market realities. Last year, the firm returned 30% in its flagship fund, and its long-only fund was up 46% as Gaonkar and her team bet on which companies would thrive in a post-pandemic world. The flagship fund roughly tripled the performance of the average fund's returns last year, according to Hedge Fund Research.

So far in 2021 the going has been tougher, as the manager fell by as much as 10% in the first quarter. 

While the firm isn't as big of a player in the private markets as Tiger Global, Coatue, or D1, it told investors in mid-2019 that it would open up the long-only fund to private investments as more attractive opportunities began to emerge, a move that has paid off thanks to the lofty valuations in the private space.

Investments in 2021 have included the most recent funding rounds for the salad chain Sweetgreen, the corporate credit-card company Brex, and the content-creator subscription service Patreon. The firm's past winners include Uber, Snap, and Chewy.

Public-equity investors meanwhile have struggled to make sense of valuations in a world where Tesla is worth more than every other automaker and tech companies have no earnings. Nowhere has this divide been acute than in the value vs. growth debate.

While many asset managers have stuck to outdated definitions of what value or growth companies look like, Lone Pine's managing team has pushed outside the box.

At the aforementioned Milken Conference in October, Gaonkar argued that "some of the growth sectors actually look like very good value if you actually believe in the duration of growth that has been pulled forward by COVID-19 and the respective push that has been given to certain areas of tech."

In a letter to investors in late 2019, the firm cracked the lid more than usual when Gaonkar, Craver, and Granat outlined how companies in outdated industries shouldn't be considered value investments just because their earnings look solid.

"The backward-looking nature of factor investing thus overstates the value of 'value.' Past is not prologue," the trio wrote.

This line of thinking is a part of the intellectual capital the trio has accumulated over decades of investing — how Lone Pine is able to set itself apart from other funds in a crowded marketplace.

"The idea of what is value and what is growth exists in the investor's mind," said George Patterson, the chief investment officer of Prudential's quant arm, QMA.

"The economy evolves. It's not something that is taught in a classroom. What and how the market is valuing something is what is most important."

'Do you have the guts to deal with volatility'

While her title at Lone Pine is officially portfolio manager, Gaonkar's self-given title of trend-follower, in online bios and past articles on her work, is accurate, former investors and colleagues say. While she's obviously a talented financial analyst — you don't graduate from Harvard Business School and spend two decades learning from Mandel without becoming a well-versed numbers cruncher — it's her ability to project where the world is going that sets her apart.

"She's proven to be one of the few to not only recognize a trend but stick to her top-down views," said one former investor.

"It's difficult to find someone with that staying power. Do you have the guts to deal with volatility and maintain your positions and maintain your conviction?"

People have described Gaonkar's partnership with Granat as a perfect pairing. Granat has earnings figures memorized while Gaonkar thinks about companies in a macro sense.

The trio of Gaonkar, Granat, and Craver splits different sectors among themselves. Gaonkar is responsible mostly for media, tech, telecom, and emerging-markets financial companies, while Granat's main focus is consumer companies. Craver handles companies in the business services, healthcare, industrials, and financial sectors.

The three of them managing the firm's flagship long-short fund and long-only fund, and like many hedge funds, big bets on well-known tech names are common.

It's a sector where companies' earnings don't matter as much as their promise, and the firm's five biggest holdings are Shopify, Coupa Software, Microsoft, Groupon, and Netflix, according to regulatory filings from the beginning of the year. Lone Pine is also heavily invested in Facebook, Adobe, and Snap, among other Silicon Valley favorites.

This type of thinking bleeds into her work outside of Lone Pine. In an interview with local Bay Area publication The Almanac for a project she did with Byrne, who she met through musician Brian Eno, she remarked how "context determines much of how you see the world" in reference to the pair's illusion-filled Theater of the Mind exhibit.

The context she is working in is one that's stacked against her. 

Female portfolio managers in the hedge-fund industry are rare, and funds run by women are even rarer. Less than one out of every five employees in hedge funds is a woman, according to the research firm Preqin, and the numbers are even lower at the executive level. At Lone Pine, the three-person management team has not one but two women. 

Gaonkar isn't just managing a sleeve of the portfolio by herself either. She co-leads an 11-person team of analysts. For women entering the industry, that can be eye-opening, said Amanda Pullinger, CEO of 100 Women in Finance.

"For most women on the investment side, they tend to be the only one. It can be a very lonely place," she said. "It's not just about having women at the top but having them visibly engaged. It completely shifts the perspective of these young women." 

Her back garden

Gaonkar might be the most interesting person in hedge funds — a major claim for an industry full of big personalities and even bigger wallets.

Her family might have wished she'd chosen medicine over economics decades ago at Harvard, but Gaonkar has done a lot for the field. She's founded two nonprofits dedicated to public health, Surgo Foundation and Ariadne Labs.

Surgo, which she founded alongside the Gates Foundation veteran Sema Sgaier, Malcolm Gladwell, and her husband, set out to solve the sanitation crisis in India, she said in the 2017 W Magazine profile, but it soon expanded to a variety of projects.

If you want to see her work in-person, the Theater of the Mind production is set to come to Denver this year after being postponed by the pandemic. Byrne warns attendees that it made him and Gaonkar "rethink some of our own beliefs and assumptions, to see ourselves and the world in a different way."

It pulls stories from their own lives, the production's website states, to create a mind-bending experience.

"Mala and I have been fascinated by the science behind these experiences for a number of years, and though reading about the phenomena involved is exciting, I sensed that it's one thing to read about something and quite something else to actually experience it," Byrne wrote on the production's website.

Beyond creating her own art, Gaonkar is also a major contributor to the space as a donor, advisor, trustee, and more. The Paris Review, the Tate Gallery, Artangel, and more have all counted her as a board member or trustee at some point.

"She was inquisitive about our philosophy and ambitions and decisive with her philanthropy," said Lingwood, of Artangel, a nonprofit arts organization that funds projects in the UK.

"She's discreet and precise, not showy at all, which is appreciated when you run an arts organization."

Allocators can sometimes be wary when their managers start taking on projects outside of work, but for Gaonkar, exposure to other fields and people is important to understand the trends shaping the world — and how technology companies will address them.

Plus, it's good to have hobbies.

At her 25th anniversary for the Harvard undergrad class of 1991, she was asked to be a panelist not on finance or investing but about storytelling with the movie director and fellow Harvard grad Darren Aronofsky. The name of the panel: "Do Stories Matter?"

"I think it's important to have things that you explore and indulge intellectually that are separate from your work," she said in the 2017 W Magazine profile.

"Everybody needs a back garden."

Join the conversation about this story »

NOW WATCH: We tested a machine that brews beer at the push of a button

Colin Lancaster is adding another big name to his resume.

The former head of macro strategies at Citadel and Balyasny is starting a new macro investing division at Schonfeld Strategic Advisors, which was started by billionaire Steven Schonfeld. 

Lancaster and his team will be based across three different offices for Schonfeld in New York, Miami, and London, where Lancaster has spent the bulk of his career. 

Lancaster only joined London-based Matador Investment Management in January as its chief investment officer where he launched a new strategy, the Diversified Alpha Fund. He is bringing 11 people from Matador to join the $7.8 billion manager with him. 

During a year-long garden leave after leaving Citadel in 2019, Lancaster wrote a book called "Fed Up!", which is a fictionalized account of how a macro trader would work during the global pandemic. In an interview with trade publication eFinancialCareers about the book, Lancaster said a macro trader's job is ultimately to nail down what the future of the world looks like, and find countries or regions that are being overlooked.

"We do an amazing amount of work to try to answer this question. When we find an outlier, something that's not priced by the markets, we get excited," he said.  

For Schonfeld, the pandemic did not slow down its aggressive hiring plans at all. The firm has brought on 16 new teams in the last 12 months, according to the release. It's also rolling out a new training program to keep the pipeline of talent flowing. 

"Colin's hire is the latest milestone in Schonfeld's continued growth and evolution," said Andrew Fishman, president of Schonfeld, in the release. "We remain focused on building a preeminent multi-manager platform offering comprehensive investment solutions."

Schonfeld's flagship fund returned 10% last year. Through the first four months of this year, the same fund has returned 8.1%, according to a source familiar with the firm. The average hedge fund has returned 8.7% through April, according to Hedge Fund Research.

Join the conversation about this story »

NOW WATCH: How the Navy's largest hospital ship can help with the coronavirus

• Bill Ackman hopes to close his huge SPAC deal in the next couple of weeks.
• The Pershing Square chief is hedging against inflation and a market correction.
• Ackman switched Starbucks stock for Domino's Pizza based on valuation and likely upside.
• See more stories on Insider's business page.

  ---

Billionaire investor Bill Ackman hopes to close his mega-SPAC deal in the next couple of weeks, continues to hedge against inflation and a potential market downturn, and swapped out Starbucks for Domino's Pizza in search of higher returns, he said on an earnings call this week.

Ackman's "blank-check" company, Pershing Square Tontine Holdings, floated last summer with the goal of spending about $5 billion for a minority stake in a private company and taking it public. The investor revealed earlier this month that he's been working to buy a piece of an "iconic, phenomenal, great business" since early November, and was close to sealing the deal.

"We've done our homework, we like the business, we love the management team, and we are working to complete a transaction," Ackman said this week. "Hopefully within a couple of weeks or so."

If the deal falls through, Ackman and his team will turn their attention to a second target, he added.

Ackman, who made a $2.6 billion profit by hedging the pandemic last spring, also weighed in on growing inflation fears and the steps he's taken to protect his portfolio. He pointed to multiple government-stimulus packages over the past year, and the prospect of pent-up demand being released and savings being spent as the economy reopens, as drivers of higher prices that could spur the Federal Reserve to hike interest rates. That represents a "risk for markets generally," he said.

The uncertain backdrop prompted his fund, Pershing Square Capital Management, to spend $157 million on interest-rate "swaptions" between December and early February. The position's value — which ballooned to almost $500 million by the end of March — is still up about 2.5 times, Ackman said.

The Pershing chief also elaborated on why his fund sold a 1% stake in Starbucks and snapped up more than 5% of Domino's— a position valued at about $750 million as of March 31 and $860 million today. The move was driven by price and potential upside, he said.

"We're always willing to trade an existing holding at a kind of full valuation for a business of similar quality at a much more attractive valuation," Ackman said. "That was the thinking behind the switch."

The investor and his team determined that Starbucks was likely to generate returns in the low double digits, while Domino's promises long-term returns in the high teens or low 20s, he added.

Join the conversation about this story »

NOW WATCH: Why electric planes haven't taken off yet

Paying for someone else's lawsuit used to be illegal. Now it's a multibillion-dollar opportunity.

Commercial litigation funders make money by advancing money to businesses that lack the resources or the patience for a lawsuit. In return, they get a multiple of what they invested (often double or triple) or a return anchored to an interest rate. Litigation funders now have $11.3 billion invested or ready to invest in US commercial litigation, according to a recent estimate by Westfleet Advisors. 

The original litigation financiers in the US were often plaintiffs' lawyers, whose contingency-fee model — "no fee unless we win"— is a form of self-funding. A simple slip and fall might  net just a $10,000 fee, but complex and risky cases can be lucrative; the lawyers hired by states to sue tobacco companies in the 1990s made billions.

Today, litigation finance is much more specialized, even corporate. While funders still back large groups of little guys, like drivers who bought a dirty diesel from Volkswagen or shops that say Visa and Mastercard charged excessive fees, they also cut deals with big businesses, like supermarket chains that overpaid for broiler chickens and manufacturers that believe their trade secrets have been stolen.

"This asset class is growing and maturing and becoming an accepted part of the litigation industry," said Bill Farrell, a managing director at Longford Capital, a private-litigation funder.

Westfleet Advisors, the source of the $11.3 billion estimate, has said there are at least 46 litigation funders active in the US market.

Heavy-hitting industry players include hedge funds like Fortress Investment Group and D.E. Shaw & Co. Bankers at Stifel and Jefferies have also worked on legal-industry deals. And some of the biggest funders have formed a trade group, the International Legal Finance Association, meant to be a counterweight to groups like the US Chamber of Commerce that would like to see more regulation of their industry.

Commercial-litigation finance is fraught with risk. In many cases, the money is nonrecourse, meaning that if a case is unsuccessful, investors suffer a total loss. But many funders have made investments in portfolios of cases, in which a win against one adversary can offset a loss against another. And some companies specialize in making loans to law firms that are backed by guarantees, though such companies aren't the focus of this article.

Since 2020, Insider has spoken with dozens of funders, lawyers, and finance professionals about the commercial-litigation finance industry, with a focus on the US and on investments in categories other than patent litigation. Below are some of the companies and individuals they singled out for their influence and savvy.

Billion-dollar behemoths

Burford Capital, which reported a $4.5 billion portfolio in its last annual report, is one of the top dogs in litigation finance. It pursues a mix of strategies, funding single cases and groups of cases while also cutting deals directly with corporations that might have large legal claims but lack the bandwidth to pursue them. Its co-chief operating officer Aviva Will is involved with underwriting major deals, with support from a large staff with expertise in insurance, IP, and other areas.

One of Burford's biggest cases is the so-called Peterson case, which started as a claim against the Argentinian government that Burford paid €15 million ($18 million) to acquire. Its value has risen as the case has progressed, and the company sold 10% of the claim for $100 million in 2019. Burford has also been targeted by the short-seller Muddy Waters.

Omni Bridgeway, with locations around the globe, manages about AU$2.2 billion ($1.7 billion), according to its most recent annual report. With roots in Australia, it still has major cases there, like a firefighting-foam contamination case that settled for AU$213 million ($167 million) last year. But it also has dozens of employees in the US, including Jim Batson in New York and Matthew Harrison in San Francisco. Chief Investment Officer Allison Chock gets involved in big deals.

Therium Capital Management is another major funder, though unlike Burford and Omni, it isn't publicly traded. It says it's raised $1.1 billion, including a £325 million ($460 million) raise in 2019 from institutional investors and an unspecified sovereign wealth fund. While its work in the US is somewhat under wraps, it has worked on several major cases in Europe, including funding claims against Volkswagen in its 2015 emissions scandal.

Neil Purslow runs the group, and Eric Blindermann runs the Therium Inc. team in the US. He said the US investments run the gamut, from a recent $5 million investment in an antitrust lawsuit to a $10 million-plus investment in a portfolio of insurance cases brought by a major international law firm.

Harbour Litigation Funding is well known in its base in Europe, but it has been looking for opportunities in the US, which amounts for about 10% of its investment portfolio, according to Chief Investment Officer Ellora Macpherson. The company, which is privately held, says on its website that it has raised more than $1.5 billion and has financed litigation against Uber in Australia, arbitration against Italy's government and numerous shareholder lawsuits around the world. Its US representative is Kory Parkhurst.

Longford Capital is another major player and has made headlines with an effort to team up with schools like the University of California, Santa Barbara to monetize the patents developed by its researchers. Longford has raised more than $1.1 billion, including $435 million earlier this year. A recent regulatory filing lists a Fund P with more than $119 million in gross assets whose existence hasn't previously been reported. Bill Farrell, Tim Farrell and Michael Nicolas are its leaders.

Pure-play private funders

Bench Walk Advisors was cofounded in 2018 by Stuart Grant, a former lawyer at Skadden who also cofounded Grant & Eisenhofer, a top firm for shareholders litigation. Grant said in an interview with Reuters that he shifted focus to litigation finance after a few adverse court rulings because "I don't like losing." His litigation-funding shop claimed a 93% win rate as of the end of last year. It says it's invested more than $300 million.

Contingency Capital was launched in November by Brandon Baer, an experienced lender who co-led the legal-assets group at Fortress. While the firm is still new and not much about its activities are known, it's minority-owned by TFG Asset Management, which manages $30.7 billion, and has coinvesting commitments from Fortress and an undisclosed fixed-income manager totaling $1.4 billion.

The team has recently grown with hires including Jeff Cohen from Southpaw Asset Management and Kacey Wolmer, who joined from FirstKey Mortgage.

GLS Capital is a relatively new firm run by familiar faces. Adam Gill, Jamison Lynch, and David Spiegel, its three managing partners, got their start at Gerchen Keller Capital, which was sold to Burford for $160 million in 2016. Several people listed on the firm's website have backgrounds in pharmaceuticals and life sciences, where disputes involving licenses, patents, and other intellectual-property matters are common.

"We review deals anywhere between $1 million and $50 million in size," Spiegel said. "Our sweet spot is between $5 million and $10 million."

Lake Whillans, founded by Lee Drucker and Boaz Weinstein, is also cited as a major player. Said by one observer to be "comfortable with more distressed, hairy situations," the company raised $125 million in late 2017. At least one of its cases has been publicly disclosed: a $5 million stake in a case brought by Cel-Sci, a drug developer.

Legalist has funded commercial claims and mass-tort litigation. The company, run by the Harvard dropout Eva Shang, has emphasized its use of analytics to identify investment opportunities. Shang has said its investments average $500,000 apiece, smaller than those made by other funders.

LexShares, run by Jay Greenberg, has also emphasized a data-driven approach, using a program it calls the "Diamond Mine" to find investment opportunities in court filings. The company courts individual investors as well as institutions and announced last year that it was raising an additional $100 million to invest in cases.

Parabellum Capital is run by Howie Shams and Aaron Katz, two veterans of Credit Suisse's legal-risk strategies and finance unit, one of the earliest involvements by a mainstream financial institution in the litigation-funding space. Its Form ADV lists more than $666 million in discretionary regulatory assets under management as of the end of 2020 and says its investments tend to range from $2 million to $15 million depending on whether it's investing in a smaller single case or a larger portfolio. Parabellum is one of a subset of funders that also invests in patent litigation.

Validity Finance is led by Ralph Sutton, another alumni of Credit Suisse's early venture. The firm, which was set up with $250 million from TowerBrook Capital Partners, said last year that it has deployed $125 million across a range of court cases and arbitrations and raised another $100 million.

Mainstream investors

D.E. Shaw's litigation-funding team is led jointly by David Gallagher, an alumnus of one of Omni Bridgeway's predecessor companies, and Sarah Johnson, who has spent 15 years in D.E. Shaw's corporate credit unit. The team's "sweet spot" is investments of $20 million to $50 million, according to the company, and it focuses on quick decisions and flexible terms.

The Fortress team is led by Jack Neumark, with Joe Dunn described by some people as his right-hand man. (The firm has also been involved in high-stakes patent disputes, but a different team led by Eran Zur handles those deals.) While Fortress has directly funded some high-stakes disputes and bought litigation claims, it's also been known to extend credit to other litigation funders, including Vannin Capital.

Tenor Capital has $5.4 billion and has used some of that money to back several mining companies in their claims against foreign governments. Led since 2004 by Robin Shah, a JPMorgan alumnus, with Blair Wallace, formerly of Och Ziff, managing a portfolio of litigation, the firm has backed Crystallex, which is trying to seize Citgo in order to collect a $1.2 billion award against Venezuela; Eco Oro, which has sued Colombia; and Gabriel Resources, which seeks to hold Romania liable for scuttling its operations there.

The brokers and bankers

Westfleet Advisors and its founder, Charles Agee, are one of two names that regularly spring from the lips of lawyers and funders in the litigation-finance industry. He and his colleagues Gretchen Lowe and Barry Kamar connect claimants, lawyers, and investors. They also regularly conduct and publish surveys of the industry.

Andrew Langhoff is also regularly cited as a trusted source of perspective and opportunities by people in the industry. A former Big Law litigator who went on to hold roles at Burford and at Gerchen Keller, Langhoff now runs Red Bridges Advisors.

Stifel Financial made headlines in 2019 when it hired Justin Brass and Sarah Lieber from Jeffries. Brass, a former bankruptcy lawyer, and Lieber, who worked for an insurer after years at Jones Day, are both Burford alumni. While many commentators said a lack of standardization has made litigation-finance investments hard to flip, Stifel said Brass and Lieber have syndicated more than $1 billion in litigation investments since joining in 2019.

"If I'm playing checkers, they're really playing three-dimensional chess," one lawyer who's worked with them said.

Join the conversation about this story »

NOW WATCH: Epidemiologists debunk 13 coronavirus myths

• Ted Seides made a $1 million, decade-long bet with Warren Buffett that he lost in 2017.
• The investor wagered that hedge funds would outperform a S&P 500 index fund.
• Seides probably wouldn't make the same bet today as the odds of winning are lower.
• See more stories on Insider's business page.

  ---

Ted Seides famously lost a $1 million bet with Warren Buffett that a basket of hedge funds would outperform the S&P 500 index over the course of a decade. The former hedge fund investor doubts he would place the same wager now.

"I probably wouldn't today for the next 10 years, not because I necessarily think it's a losing bet, as much as I don't think the odds are as tilted in favor of hedge funds as they were at the beginning of 2008," Seides said in a recent RealVision interview.

"You make a bet like that in public with a guy like Warren, I think it's incumbent on you to think that your odds are awfully good to win," he continued. "My guess is it's probably a 50/50 bet today, so I wouldn't do it as a 50/50 bet."

Seides, who hosts "The Capital Allocators Podcast," previously invested in hedge funds at Protégé Partners, a so-called fund of funds. For his bet with Buffett, he selected and tracked the performance of five funds invested in more than 100 hedge funds in total, while the Berkshire Hathaway chief backed the Vanguard S&P 500 index fund. They agreed the winner would be whoever posted the higher return net of fees, costs, and expenses.

Read more: Warren Buffett is hoarding $80 billion of cash, cleaning up his stock portfolio, and declining to bash bitcoin. Veteran investor Thomas Russo says why that strategy will ultimately pay off.

Buffett proposed the bet because he wanted to underscore the value of owning an index fund for passive investors, and highlight the hefty fees that hedge funds charge. He emerged the victor and donated his $2.2 million of winnings to charity.

Seides told RealVision that his wager with Buffett compared apples to oranges, and it would have been fairer to adjust their returns for market exposure, geographical focus, tax rates, and other differences. However, he acknowledged that complicating the bet "takes all the fun out of it."

The podcast host also bemoaned that his dad, a doctor and neophyte investor who he described as a "hoarder," missed out on buying a piece of Buffett's company over 60 years ago.

"He loves owning things and does not like selling them," Seides said, pointing to his dad purchasing IBM stock in 1959 and still holding it today. "It is a shame he didn't come across Berkshire Hathaway back then, because it would be worth a lot more."

Join the conversation about this story »

NOW WATCH: A cleaning expert reveals her 3-step method for cleaning your entire home quickly

Paying for someone else's lawsuit used to be illegal. Now it's a multibillion-dollar opportunity.

Today, litigation funders have $11.3 billion invested or ready to invest in US commercial litigation, according to a recent estimate by Westfleet Advisors. Westfleet estimates there are at least 46 litigation funders active in the US market.

Heavy-hitting industry players include hedge funds like Fortress Investment Group and D.E. Shaw & Co. Bankers at Stifel and Jefferies have also worked on legal-industry deals. And some of the biggest funders have formed a trade group, the International Legal Finance Association, meant to be a counterweight to groups like the US Chamber of Commerce that would like to see more regulation of their industry.

Insider spoke with dozens of funders, lawyers, and finance professionals to find out who's shaping the booming litigation finance industry. 

Read the full list of power players here:

Join the conversation about this story »

NOW WATCH: Here's what it's like to travel during the coronavirus outbreak

Billionaire Jamie Dinan decided he was done with the hedge fund game after decades in the business, announcing at the end of last year that his York Capital was going to wind down its US and European funds to focus on more illiquid investments.

But for at least four of Dinan's employees, there's still a lot that hedge funds have to offer — and they are each launching or spinning out their own firms. 

Sources tell Insider that portfolio managers Rizwan Sabar and Jack Land are each planning to start their own funds after working for Dinan, co-owner of the NBA's Milwaukee Bucks.

Sabar's fund will be named Zade Capital and is set to be based in New York, a source familiar tells Insider. Sabar was most recently the head of North American equities at York and ran a portfolio of roughly $1 billion. Last year, his portfolio made 40%, a source said, and he is up 8% through April this year.

Land, the former director of European credit for York, is starting a London-based manager named Axebrook Capital with Tammy Lake, an executive from Zebedee Capital, as his chief operating officer, a source told Insider. He is up 20% this year through April in his portfolio, the source said. 

Both Land and Sabar are expected to launch in the second half of this year. 

Bloomberg recently reported that York's former co-chief investment officer, Christophe Aurand, is also planning to launch his own firm in London with close to $1 billion. 

And the spin-out is from Masahiko Yamaguchi, who is taking the firm's Asia business and turning it into MY Alpha Management, after the initials of Yamaguchi. Yamaguchi was York's CEO of its Asia business. His COO is Kevin Carr, who was Yamaguchi's right-hand man at York in Hong Kong. 

York, which ran more than $26 billion in 2015, launched in 1991 with less than $4 million in assets, and grew to invest across asset classes and geographies. But a tough string of performance in different hedge funds and Dinan's struggles to name a successor led to executive departures and investor withdrawals, according to the Wall Street Journal.

Bad energy bets sunk its credit hedge fund last year, the Journal reported, but the firm will still run more than $9 billion in non-hedge fund offerings. Credit Suisse, an investor in the firm, wrote off more than $450 million in losses for its stake in the hedge fund. 

Land, Sabar, Aurand, Yamaguchi, and a spokesperson for York Capital either declined to comment or did not respond to requests for comment.

It's time to launch

Launches industry-wide are expected to pick up this year, according to Aaron Steinberg, head of prime services sales and capital introductions for BNY Mellon's Pershing unit. After hardly any launches last spring, as allocators and prospective managers were unable to meet due to the pandemic, investors are ready to put their money to work.

"The good news for the alternatives industry is there continues to be increased interest from institutional investors," Steinberg said. 

Hedge funds' solid performance last year — on average, returning 11.8% — and protection during the first months of the pandemic has renewed interest in the space. Hedge Fund Research found that the industry had more than $3.8 trillion in assets at the end of the first quarter thanks to performance gains and $6.1 billion of net inflows — the third straight quarter of inflows. 

The last two quarters of 2020 also saw more hedge funds being launched than liquidated for the first time since 2018. 

Join the conversation about this story »

NOW WATCH: Why electric planes haven't taken off yet

The hedge-fund world didn't come running to cryptocurrencies.

While some smaller funds embraced bitcoin and other digital currencies early on, the biggest names in the industry needed to warm up to the idea of investing in a completely new asset class. 

But now that some of the world's most respected investors have embraced bitcoin, the floodgates have opened. A new PwC report finds that while only 21% of hedge funds are currently investing in digital assets, a quarter of those who are not have made plans to this year. 

The macro guys — managers like Brevan Howard, Tudor Capital, and more — were first of the big names to jump on the train more than a year ago, and the large multi-strategy funds have followed suit this year. Steve Cohen's Point72, Izzy Englander's Millennium, and Dmitry Balyasny's eponymous fund have all either hired people to trade crypto, invested in digital currencies through a trust, or are exploring the area broadly. 

There are still big names staying away from the space, such as Ken Griffin's Citadel, which has not publicly been linked to any digital currency interest or efforts. In a CNBC interview in February, Griffin said he doesn't understand the "economic underpinning of cryptocurrencies."

"I understand how to value a stock — the net present value of earnings. I understand how to think about currency-exchange rates around the world. I don't know how to think about what is effectively a digital token," he said. 

Here are what some of the biggest hedge fund managers are doing in the volatile space. 

Point72 Asset Management

In May, billionaire Steve Cohen's Point72 Asset Management told investors in a letter that it was "exploring opportunities around blockchain technology and its transformative and disruptive capabilities."

"We would be remiss to ignore a now $2 trillion crypto currency market," the firm said in a letter, according to Bloomberg. 

The letter did not say if it would invest in the space through its private investing arm or through its hedge fund, telling investors "it's too early to say what paths we will ultimately pursue and when."

Balyasny Asset Management

Dmitry Balyasny's eponymous firm is doing due diligence on portfolio managers who invest in cryptocurrencies, including bitcoin, but the firm's hedge fund had not invested in the space as of April. 

Millennium Management

Billionaire Izzy Englander's Millennium has exposure to the crypto markets through a variety of instruments, including ETFs and trusts, such as Grayscale Investments.

Grayscale, which has pulled in hundreds of millions from hedge funds, operates 14 different trusts that invest in individual currencies including bitcoin, ethereum, litecoin, and more. The firm's hedge fund is invested in some of Grayscale products, Millennium confirmed. 

Third Point Management

Dan Loeb, the billionaire founder of Third Point, hinted about his crypto exposure before it came out in regulatory filings.  

When Coinbase's media arm reported that Loeb is a client of Coinbase, Loeb tweeted that he was "outed as a #holdr." His firm has also made an investment in eToro, a private trading exchange that allows crypto which will go public via a SPAC in a $10.4 billion deal. It's unclear how much cryptocurrency Third Point holds.

Tudor Investment Corporation

Paul Tudor Jones has been a bull for bitcoin for more than a year now.

The billionaire founder of Tudor Investment Corp. has likened investing in bitcoin to getting in early on a hot tech company.

He said last year that he put 1 to 2% of his assets in bitcoin, and it was later revealed he used Coinbase and Bakkt as custodians. 

"The best profit-maximizing strategy is to own the fastest horse. If I am forced to forecast, my bet is it will be bitcoin," Jones said in the client note last year.

Brevan Howard

Alan Howard, the billionaire cofounder of Brevan Howard, had already been investing his personal wealth in digital currencies, and his massive macro hedge fund is now following suit.

Up to 1.5% of Brevan's flagship fund will be invested in digital assets, according to Bloomberg, which reported in April that Johnny Steindorff and Tucker Waterman, co-founders of crypto investment firm Distributed Global, will oversee the initial allocation for the fund. Brevan is an investor in Distributed Global, as well as One River Asset Management, which runs crypto funds of its own.

Howard, similar to Avenue Capital founder Marc Lasry, invests some of his personal wealth into digital currencies.

Bridgewater Associates

For everyone worried about inflation, Ray Dalio is recommending bitcoin, not bonds, as a hedge.

The billionaire founder of Bridgewater Associates said in an interview with CoinDesk last week that he expects the US dollar to be devalued soon, pushing bitcoin higher. He revealed in this interview that he is personally invested in bitcoin, somewhat of a surprise as he was previously skeptical about the space. 

At the start of this year though, Dalio started to change his tune, calling bitcoin "one hell of an invention" in a letter to investors. It's unclear how much crypto Bridgewater holds.

Tiger Global

While Tiger Global is not investing in crypto through its hedge fund, the firm's private investing arm is still exposed to the space. 

Billionaire Chase Coleman's manager was a leader in Babel Finance's $40 million Series A alongside venture firms like Sequoia and Dragonfly Capital. The firm, which has offices in Singapore, Beijing, and Hong Kong, has gone from offering loans to crypto miners and traders to a more full-scale crypto lending business targeting institutional clients. It also has a suite of asset management products focused on digital currencies. 

Tiger Global also partnered with fellow Tiger Cub Coatue Management to lead Bitso's $250 million Series C, as the Mexican company became the first crypto unicorn in Latin America with a $2.2 billion valuation. 

Bitso operates a cryptocurrency platform in Mexico, Argentina, and Brazil. 

Coatue Management

Coatue's investment into Bitso alongside Tiger Global came just five months after the Mexico City-based start-up raised its Series B. 

The company has raised more than $300 million in total now, and Daniel Vogel, the cofounder and CEO of Bitso, said more than 2 million people use the platform, which only requires a minimum buy of 50 Mexican pesos, or roughly $2.50.

Man Group

In 2017, Man Group CEO Luke Ellis told Reuters that his firm would add cryptocurrencies to its investment universe for the firm's traders, but it seems Ellis isn't sold on the long-term benefits pitched by bitcoin evangelists. 

In a March interview with CNBC, Ellis said bitcoin is more of a trading instrument than a long-term asset allocation.

Join the conversation about this story »

NOW WATCH: How waste is dealt with on the world's largest cruise ship

For Jason Karp, working in finance was rewarding. He made millions, won awards, and started a business that employed dozens of people.

But in 2018, after a couple of tough years at his hedge fund, Tourbillon, he left the only industry he'd ever worked in to dive into a space that he now sees is his true passion: healthy foods. 

When he closed Tourbillon, he wrote a manifesto of sorts in the form of a goodbye letter to investors, focusing, in part, on his newfound passion for healthy eating. "I believe we are at an inflection point of a food and product revolution as people now recognize that the American approach to diet and disease has failed abysmally," he wrote in the widely read letter. 

Karp's new company, HumanCo, is geared toward the overall mission to "live optimally as human beings," he previously told Insider, something he has been passionate about since he was diagnosed with autoimmune diseases early in his career, a topic he discussed in the letter to investors.

This harrowing journey instilled in me a life-long passion of focusing on nutrition and how it affects the health and wellness of humanity. As I was forced to scrutinize all aspects of food and the food industry — what was in the food, whether it came from a farm or a profiteering corporation, what kinds of pesticides, engineering and "technology" were used to make it shelf-stable, taste great, and look appealing — I learned there was a huge knowledge gap. Amazingly, I find there is no human activity where there is a greater disconnect between knowledge and frequency of use than eating and human nutrition.

The career move to healthy foods has been a good one so far for the Wharton grad, as Karp's conglomerate has rolled out new products and partnered with the actress Scarlett Johansson on new items. 

In a recent interview with Insider, Karp said his success has led to calls from the best of the best of his old industry — "titans who were way more successful than I was"— who want to pick his brain on what it was like to leave finance behind.

"They asked me confidentially, 'How does it feel? I'm sort of thinking about it,'" he said. 

"There's a lot of high-profile hedge-fund managers who will never admit this publicly because they have too big of a business, but they want more purpose, and they're feeling like they can't admit it out loud because they're billionaires."

Karp said he's gotten at least five calls like this, and "a common thread I've observed with some of these very, very high-performing managers is that they're looking for a way to find more meaning in what they do." 

Burnout in finance, especially during the pandemic, is far from uncommon, of course. Investment banks and private-equity firms have resorted to massive bonuses and Peloton giveaways to keep young talent who are working around-the-clock. 

While it's rarer to see those at the top of the industry, who have dedicated their careers to making it to that point, in the same boat, the hedge-fund space has had plenty of examples over the past couple of years.

David Tepper, the billionaire founder of Appaloosa Management, has returned most outside capital to focus on his NFL team, the Carolina Panthers. Names like Leon Cooperman and John Paulson are all out or nearly out of the game. 

Traditionally these ultrawealthy individuals — almost always men — try to find meaning through politics, with massive donations and elaborate campaigns. Robert Mercer, a longtime executive at the quant giant Renaissance Technologies, backed the right-wing news organization Breitbart and other Republican causes for years. The Renaissance founder Jim Simons and fellow hedge-fund billionaire George Soros have been some of the Democratic Party's biggest donors for years. David Stemerman closed his hedge fund, Conatus Capital, to run for governor in the state of Connecticut, losing in the 2018 Republican primary. 

Others, like the ValueAct Capital cofounder Jeffrey Ubben, have stayed in finance but shifted focus. Ubben is reportedly aiming to raise up to $8 billion for Inclusive Capital Partners, a fund he founded last summer that focuses on environmentally and socially conscious investing, according to Reuters. 

Looking around for those other opportunities can be risky: Karp said there's a "real fear" among many high up in finance that even talking about changing careers will instantly torpedo their current one. But he hopes his own transition to the food world will provide a clear example for others.

"I want other high performers to acknowledge that it's OK if you're depressed but you're very rich," he said. "It's OK if you're at a point in your life where you're not finding meaning anymore."

Join the conversation about this story »

NOW WATCH: Why Pikes Peak is the most dangerous racetrack in America

On a spring day in 2018, Jason Karp paid a visit to Kern Valley State Prison, a maximum-security facility in California's Central Valley. 

Karp was the founder of Tourbillon Capital Partners, an award-winning hedge fund that managed more than $4 billion. Traveling with a few others from the business world to Kern Valley as part of a volunteer program, he met with inmates, counseling them on entrepreneurship and offering advice on how to make the most of their lives behind bars. 

But despite his success, Karp himself was grappling with how to make his life meaningful.

After Karp's two decades in the finance world, generating returns was getting harder, and Karp found himself struggling to find the drive to beat his ultracompetitive hedge-fund peers. Instead, he was more interested in the food world, having started an organic chocolate brand and heavily investing in the food and wellness space. He also believed he had transformed his own health with diet after a devastating health diagnosis.

The trip had an impact on Karp, he told Insider in a recent interview. The inmates the group met were serving long sentences, and many were unlikely to return to life as free people. 

Hearing from the inmates forced Karp to question whether he was making the most of his life as a free man. "I don't know how long I'm going to live, but if I have another 40 years left, I want it to be meaningful, and I really want to help people," he added.

Tim Ferriss, the entrepreneur and early-stage startup investor best known for his "4-Hour Workweek" philosophy was also on the Kern Valley trip. "My interpretation was that he was in a transition period and was pursuing a lot of deep reflection on his life," Ferriss said. "I think that it actually overlapped and folded into a lot of the conversations that we were having and the testimonies that we were hearing from the inmates."

Later that year, Karp would shutter Tourbillon and leave the hedge-fund world behind. Instead of working with derivatives and delivering alpha, his next move would involve making plant-based cream cheese and separating diet fads from long-term trends in the food industry.

Like his career before, his new venture, HumanCo, would not have modest ambitions. He's aiming to create the next big food conglomerate, a challenger to big food companies like Unilever and Coca-Cola, but with healthier options. And he's looking to have a direct impact on the world, he says, in a way that managing a hedge fund never provided. While still in its early innings, HumanCo has already raised hundreds of millions to acquire small, up-and-coming food brands.

A hedge-fund legacy 

Like many of the world's top stock pickers, Karp's story begins at the Wharton School, where he played squash for the Ivy League school.

While hedge funds now are considered a prestigious landing spot for young finance grads, when Karp was starting out in 1998, the industry was still somewhat obscure — a risky career bet compared to investment banks.

He went against conventional wisdom though, choosing George Weiss' eponymous hedge fund over a job at the established investment bank DLJ. His first role working for Weiss, who is still the CEO of 44-year-old firm, was as a quant, even though he had no true training in the nascent discipline in which humans would build models and algorithms for computers to trade off of.

"I've always sort of had a very deep curiosity for things and never felt intimidated by diving into waters that other people would probably be afraid to," Karp said of starting his career in a field he didn't initially know much about.

His career was gaining steam as he rose the ranks at Weiss, but his health — which had been a source of pride as a Division I athlete — was deteriorating. Doctors told him he had several autoimmune diseases that could not be cured, only treated with an aggressive routine of prescription drugs. His eyes were failing, and he was soon diagnosed with a degenerative eye disease that doctors said would leave him blind at 30.

"Despite having achieved superficial measures of 'success,' I was sick and very depressed for over a year," he wrote years later when describing his time at Weiss. 

But a radical diet change — he now eats only gluten-free and organic foods – substantially improved his conditions, he said. He credits the lifestyle change to saving his eyesight, saying the "harrowing journey instilled in me a lifelong passion of focusing on nutrition."

With his health under control, he continued his rise as one of investing's brightest young stars. He left Weiss in 2005 after rising to the rank of partner and portfolio manager to join the marquee fund of the mid-2000s: SAC Capital, run by the billionaire and future New York Mets owner Steve Cohen.

As a portfolio manager and director of research at SAC, Karp developed a legacy that was not just his own work but also that of the people he brought in. He recruited and developed talent using a system that many in the industry now emulate, several industry sources told Insider.

Under Karp's direction at SAC, analysts got in the habit of updating their portfolio managers on Sunday nights on the companies they monitor, allowing investment teams to hit the ground running when the week started.

"What's much more commonplace now was not standardized back then, and, to be fair, I think Jason pioneered a lot of that," one person who worked with Karp said. 

This more standardized process, and understanding of what type of work is expected from each role, has allowed the hedge-fund industry to become more institutionalized and grow to never-before-seen sizes. For example, Cohen has dozens of portfolio managers and hundreds of analysts working at his new hedge fund, Point72. The giants of the industry, like Ken Griffin's Citadel and Izzy Englander's Millennium, have massive rosters of investors trading across asset classes and geographies.

Later at Tourbillon, Karp found personality tests were almost just as important as technical skills for senior hires. The final step in the hiring process would include a background check with a former CIA interrogator to determine whether candidates were the best fit for the role.

While the CIA interrogator is a little too pricey for HumanCo, Karp said he still does "extensive personality testing" to understand how to best manage certain people. 

"Everybody's wired differently, and some people need to be managed in different ways," he said. "And I think having that is really helpful in knowing before you start really working with them, like this person needs very explicit feedback, very specific tasks and goals, whereas this person is more of a maverick.

'A lot of introspection'

Karp had a nearly unprecedented run to start his career in finance: He hardly ever lost.

After four years working for Cohen and then three years at Clint Carlson's eponymous fund, where he was the co-chief investment officer, Karp started trading at his own fund, Tourbillon, in early 2013 with $250 million in assets and immediately had success. Running his own firm for the first time, he was able to build a culture from the ground up, and several people who worked for him at the time recalled an intense focus on personal health being a part of the overall company's ethos.

Health extended to his projects outside of Tourbillon. It was around this time that he opened Hu Kitchen, which started as a single restaurant selling the sort of healthy food that Karp credited with saving his life. The name 'Hu' was based on the brand's slogan 'Get back to human.' "We don't believe people eat the way humans were meant to eat from an evolutionary perspective," Karp has said.

His partners in the venture were his wife Jessica and his brother-in-law Jordan Brown, a real estate developer. His detractors were many. "My close friends thought I was crazy," he said. "It did not seem like a viable business model to a lot of people." The packaged organic, single-origin chocolates the company became known for were first sold at the restaurant and, in the early days, packaged at Brown's apartment. 

The pantry in the kitchen at Tourbillon also stocked the sort of healthy foods Karp favored. It looked like a Whole Foods, one former employee said, and another mentioned that there was no soda, and all bottled water was in glass because Karp was concerned about chemicals from plastic bottles leaking into the water.

Word got out that things were done a bit differently at Tourbillon. 

When sell-side analysts from banks would buy the firm breakfast or lunch, they knew "not to order Dominoes or Five Guys for lunch because Jason wouldn't like it," a former Tourbillon employee said.

Another person said Karp recommended that people work out in the middle of the day or get away from screens and phone calls if they felt stressed.

"It made you think about yourself and what you needed while you were there," the person said. 

The results spoke for themselves.

Big years in 2013, 2014, and 2015 led to Karp being named the emerging manager of the year by Institutional Investor — an honor he said he chased the second he started his own firm. By all accounts, he was on his way to hedge-fund-titan status, a worthy addition to the billionaire ranks that have come to rule the hedge-fund industry.

He had begun to invest in the food and wellness space, going long on Whole Foods before it was purchased by Amazon and shorting several of what he calls "Big Food" companies.

The only activist position he ever took in his six years running Tourbillon was in SunOpta, a Canadian natural-foods company that Karp's fund pushed to sell itself as it had failed to turn into a "thriving business with an attractive public market valuation," according to a letter Karp sent the company's management. Eventually the CEO was replaced by an executive from outside the company.

But as 2015 ended, Karp said he felt as if the advantages he had as an investor were beginning to fade. His investing strategy was losing way to large computer-run funds. Funds like his were turning to private markets to juice returns and beat the S&P 500 index. 

Karp said the structure of his fund prevented him from playing in the private markets, and his performance suffered over the next couple of years. According to Reuters, his fund fell by 9%  in 2016 and 14% in 2017 and had about half the assets at its closure in late 2018 as it did at its peak. 

"I had basically never lost money in any calendar year at that point," he said. "I had to do a lot of introspection."

Karp found his "sources of advantage were shrinking" and began thinking about what life outside finance and investing would look like. 

At the same time, through the Hu Kitchen, he began noticing "enormous inefficiencies" where a data-driven approach like he had applied at every hedge fund he worked at could make a difference.

But he was a hedge-fund guy. 

"That was my identity. And I was obviously very financially successful at it except for the last two years. I felt very conflicted about how to pivot," he said. "My heart was really in helping people, and my heart was really in creating things that make an impact."

He said as much in his goodbye letter to Tourbillon investors in 2018.

Finding the cure to his autoimmune disease in healthy food, he wrote "instilled in me a lifelong passion of focusing on nutrition and how it affects the health and wellness of humanity,"

And he revealed what he was thinking of doing next: "I plan to spend the majority of my time, both professionally and personally, focusing on private and public companies within health and wellness." 

SoftBank, Berkshire, and Hain

Karp and his cofounders found success with Hu, their upstart chocolate brand, which went on to sell in chains like Whole Foods. The company secured an investment from the Oreo maker Mondelez in 2019 that turned into an acquisition earlier this year valuing Hu at $340 million. 

But that was hardly the extent of his ambitions in the food world. Karp wanted to build his own food company.

At Tourbillon, Karp regularly surveyed companies searching for investment opportunities. He was amazed by how big names like SoftBank and Berkshire Hathaway had been able to build huge portfolios. A third company also caught his attention, though it wasn't a household name: Hain Celestial Group, maker of Garden of Eatin' tortilla chips and Celestial Seasonings teas. All three served as inspiration for HumanCo, the health-focused food company he founded in 2019.

Most of Hain's brands aren't recognizable among consumers, but Karp said the general idea of having a conglomerate for healthy-food brands made sense to him. "Many of the best health and wellness folks that I've met are really good on certain attributes like innovation, and they don't want to deal with the finance, behind-the-scenes, running-the-business stuff," he said.

"I liked the idea of having shared resources, and I liked the idea of having multiple brands that speak to different consumers," Karp added. Companies like Hain, as well as its global peers like Unilever and Nestle, often use single teams for marketing, accounting, and other duties across all of their brands. 

To make it real, Karp looked for people who knew more about the food world than he did. One was Brett Thomas, a cofounder at Cavu Venture Partners, which has invested in up-and-coming food brands including Oatly and Beyond Meat.

Karp and Thomas already knew each other — their wives were childhood friends growing up — but it was only during a dinner at Thomas' house in Connecticut in 2016 that Karp's interest in doing more with food became apparent.

Karp struck Thomas as a "fast learner" who had absorbed as much as he could about food and consumer goods, Thomas told Insider. Soon, Thomas said, he was talking with Karp and the HumanCo cofounder Ross Berman about a broader topic: "If you recreated The Coca-Cola Company, how would you build that today, and how would it be different than how it is built currently?"

"We got together plenty of times, having brainstorming sessions," he said. The idea was to build a modern-day conglomerate like Coke or Unilever.

At HumanCo, Karp is focused on food, but he said that he employs some of the same quant-like focus on data that he and his team might at a hedge fund. His executive team also includes Tourbillon alumnus Amy Zipper, who serves at HumanCo's chief operating officer, and Berman, a longtime friend who is HumanCo's president and cofounder.

Karp's analytical approach convinced Ferris to invest early on in Hu. "I knew that, unlike some CPG companies, that Jason had deal-making experience, familiarity with different types of fundraising, and the dynamics of mergers and acquisitions," he said. "Quite aside from the product development and operations side, there was someone who understood the dynamics of shepherding a company into growth and liquidity. That gave me a degree of confidence."

One recent example is clear in his approach or reproach to the keto diet, which involves consuming lots of fat but limiting carbohydrates. 

"Everyone around me who were investors was like, 'Oh, you've got to invest in keto,'" he said. "At the time, anything that said 'sugar-free' or anything that was keto was going bananas."

But Karp said the diet seemed restrictive and suspected that few people were able to stick with it. Looking at surveys on how long consumers were able to stay on the diet and how they felt about it, he didn't see an enduring trend that was worth investing in. "That's the way we use data," he said. "It's really to confirm or contradict our already-prevailing hypothesis."

Consumer packaged goods companies have been much slower to adopt this type of data than other industries, and small brands, like the one HumanCo is targeting, might not even show up in the industry-specific data like Nielsen sales numbers, for example, that are commonly used by CPGs. 

So far, HumanCo has acquired brands including Monty's, which makes cream cheese using cashews, as well as the plant-based ice cream label Coconut Bliss. It has also debuted Snow Days, a brand designed in-house that makes pizza pockets. Karp has also raised $288 million for more acquisitions through a special-purpose acquisition company with Cavu and brought on the actress Scarlett Johansson as chief creative officer for Snow Days. HumanCo also raised $15 million through a Series A funding round it closed in January 2020.

For Karp, that's worlds away from the professional track he was on the day he visited the prisoners in California three years ago.

"I started to feel as a professional investor that most of what I did, not all, but most of what I did was just passive investing in lots of things to make money," he said, looking back on 2018. "There wasn't a true purpose behind it, other than making good returns for my clients."

With HumanCo, he believes he's found that purpose he outlined in his email to investors nearly three years ago.

"I believe we are at an inflection point of a food and product revolution as people now recognize that the American approach to diet and disease has failed abysmally. And because of the massive economic consequences of diet and disease, it also represents one of the greatest opportunities for philanthropy, impact investments, and productive uses of capital to not only generate significant returns, but also to effect real positive change toward helping humanity get healthier."

Join the conversation about this story »

NOW WATCH: A cleaning expert reveals her 3-step method for cleaning your entire home quickly

Two Sigma has a new hire to help wrangle its reams of data.

Carter Clark Page joined the $58 billion hedge fund at the start of June as the firm's new head of data engineering after nearly nine years at Google, where he was a director of engineering and had nearly 100 people reporting him. Prior to Google, Page worked at a variety of firms such as education software firm Amplify and founded different start-ups including Tigres International, which had firms like Credit Suisse, Goldman Sachs, and Pfizer as clients. 

At Two Sigma, Page will focus on bringing in data and getting usable information into the hands of the investment teams.

"You win a war based on your supply chain," he said in an interview with Insider. "The outcomes are only as good as the basic resources you have."

Data is the oil that keeps the engines at quant firms like Two Sigma running. According to its website, the firm stores more than 20 petabytes — or a million gigabytes — of data a year. Data's critical function is reflected in the firm's decision to bring on Jeffrey Wecker as chief technology officer last year — he was Goldman Sachs' first-ever chief data officer before he joined John Overdeck and David Siegel's hedge fund manager. Page will report to Wecker.

"Two Sigma is a company that highly depends on differentiated data insights to drive all of our investment strategies. Engineering is the foundation which it is all built on," said Wecker told Insider. The firm recently rolled out a real-estate business that will rely heavily on data. 

And the stream of data keeps growing. Wecker pointed out how new datasets from internet-of-things devices and private companies sharing their internal data for the first time ever are popping up everyday.

"What's happening is we are still in an immense growth stage for data that is available," he said.

Two Sigma's pull

Two Sigma has consistently been one of the leaders in the financial services industry in poaching talent from the tech industry. In many ways, the New York-based firm operates like a tech company with partnerships with a robotics non-profit and a new annual symposium for top academics to share ideas with Two Sigma researchers.

The numbers bear this out, as more than 200 people from top tech firms like Google, Amazon, Facebook, Microsoft, and more have joined the hedge fund manager over the last decade, according to data from Revelio Labs. The firm's former CTO, Alfred Spector, was a long-time Google executive before joining Two Sigma. Spector retired last year. 

"I primarily look at Two Sigma as a technology company," Page said. As a hiring manager at Google, Page said he "saw the type of talent Two Sigma attracts."

Wecker hopes that talent keeps flowing. He plans to invest heavily in Page's team, saying the roughly 100-person team would become a "multiple" over the next couple of years.

"Our investment will create a tectonic shift in our data engineering efforts," he said.

Join the conversation about this story »

NOW WATCH: Epidemiologists debunk 13 coronavirus myths

Bill Ackman's special-purpose acquisition company (SPAC) is close to buying 10% of Universal Music Group for $4 billion. The billionaire investor might have his grandfather's musical talents to thank if he manages to seal the deal.

The Pershing Square chief began his first meeting with UMG executives by regaling them with a story about Herman Ackman, The Wall Street Journal reported, citing people involved in the transaction.

Ackman's grandfather wrote a song called "Put Your Arms Where They Belong (For They Belong to Me)" in 1926, which he sold to music-publishing group Tin Pan Alley for $150. The ditty sold more than 750,000 copies, Ackman told the bosses of the world's biggest music company, according to The Journal.

The UMG executives later discovered that their company owned the elder Ackman's recording. They dug up two records of the song and the accompanying sheet music, mounted and framed them, and gifted them to Ackman, The Journal reported.

Read more: A 29-year-old crypto billionaire shares how investors can use Tesla or Apple stock as collateral to buy bitcoin or ether

Vivendi, UMG's parent company, met with multiple private-equity firms and other investors interested in buying a piece of the division. Ackman's clear passion for the music business — rooted in his grandfather's legacy — along with his relationship with management and his vision for growing the company, helped him stand out from the crowd, The Journal said.

Ackman's SPAC, Pershing Square Tontine Holdings, is the vehicle looking to acquire the UMG stake. PSTH, which joined the stock market last summer, would remain a public company and could have nearly $3 billion to pursue another deal, even if the UMG transaction is successful.

Pershing Square also hopes to launch a new take on SPACs called a SPARC, which won't lock up investors' capital while it searches for a deal, and won't have the pressure to close a deal within two years. Ackman's proposed SPARC would be armed with up to $11 billion to pursue a business combination.

Join the conversation about this story »

NOW WATCH: Hate going to the theater? Here's how theaters are ruining the movie-going experience

Some of Wall Street's largest brokers are quietly tightening rules on who can bet against meme stocks popular among retail traders in an effort to protect themselves against the fallout from sharp price surges and falls, according to a Bloomberg News report. 

Firms that have adjusted risk controls at their prime-brokerage operations include Goldman Sachs, Bank of America, Citigroup, and Jefferies Financial Group, the Friday report said, citing people familiar with discussions about internal policy decisions.  

With the adjustments, some hedge funds and other institutional investors now face higher collateral requirements or are limited from shorting certain stocks. 

Jefferies Prime Brokerage will no longer offer custody on naked options in AMC Entertainment, GameStop, and MicroVision, the firm told clients in a memo seen by Bloomberg News. Naked options allow investors to short a stock without owning the underlying securities. Jefferies will not permit short sales of those securities and other stocks may be added to its list. 

The changes come during a new wave of rallies among so-called meme stocks including AMC GameStop as retail investors on social media sites such as Reddit's Wall Streets Bets forum band together to force short squeezes on hedge funds that betting shares of the companies will fall.  AMC has been the key focus of the latest rally, similar to GameStop's role during a trending frenzy in January. 

It's not unusual for banks to make risk-control adjustments as market conditions change, the report noted. 

A number of brokerages have been looking over their risk controls after some large prime brokers in March were forced to liquidate at a discount the multibillion-dollar portfolio of Bill Hwang's Archegos Capital Management. The family office collapsed after making wrong-way bets on media and technology companies. Bank of America and Citigroup were not hurt by the Archegos matter, Bloomberg said.

Join the conversation about this story »

NOW WATCH: Why we still haven't been able to find aliens

The biggest hurdle for both sides of the data equation is cost.

It's expensive for asset managers to build out data science teams and suss out the most relevant bits of info from large datasets. It's pricey for data vendors to offer different, more personalized products to managers lacking a massive data budget. 

But the data movement is impossible to ignore. The amount of non-traditional data now available to investors dwarfs what was around even five years ago, and investors desperate for an edge are putting time and resources into the broad space.

Micheal Recce is hoping to simplify it for them.

Recce, a former data executive at Neuberger Berman, Point72, and more, started Alpha ROC in April with the goal of meeting both vendors and investors where they are. He offers traditional consulting services, helping understaffed asset managers find what datasets are most useful to them, as well as software build-outs that can help both vendors and buyers.

The key thing, he said, is managing the cost of it all. He built out the data science team at Point72 known as Aperio in 2014 and 2015, and told Insider it cost "tens of millions of dollars." Neuberger Berman, where he worked most recently as chief data scientist, spent millions on its team as well.

"If it gets to less than a million, then lots of other investors would be interested in the space," he said. Competing with the biggest data buyers like large quants is nearly impossible for firms that are more traditional investors, he said. $58 billion quant fund Two Sigma for example just poached a senior Google engineer to head up its data engineering team and hopes to grow the team rapidly over the next couple of years.

Data vendors meanwhile focus on selling massive, expensive datasets to these quants because they are the biggest and most consistent consumers of alternative data. The data needs of a smaller, fundamental stock investor though are quite different than that of Two Sigma, but vendors often only sell a one-size-fits-all package, Recce said. 

"There's lots of asset managers that have no one working as a data scientist, but still want the value from the data," he said. Whether it's doing due diligence on a new investment or making sure the original thesis for an existing holding is still correct, investors want to tap into the wide world of alternative data, he said. 

To address this, one of the software services he offers is an add-on for vendors that will simplify their large datasets to a focus on a single stock or trend. Investors no longer need to do the work on their end, and vendors now have a new customer they wouldn't have gotten before, he said.

Simplifying the data can be as straightforward as finding out which stocks an investor holds in their portfolio, and working with a vendor to get data specific to those names. 

"If you can partition the data up in a way to create a new channel, it can work for the vendors," he said. He pointed to Yodlee as an example, when the data giant started selling its credit-card data on a one-month delay for private equity firms and longer-term investors. The cheaper product wouldn't work for quants who are trading in and out of names every second, but for long-term holders, the delay's impact is worth it for the price drop.

Alpha ROC is still in its infancy. Recce said the firm's "handful" of customers is keeping him busy, and he has the first full-time employee other than him joining in July. Right now, the consulting work Recce is more than enough to keep the company running, he said, and while alternative data has become well-known thanks to world's largest managers, it's still "in the early days."

"I don't think there's large-scale adoption yet," he said. 

"People have struggled to answer how this data translates to something I can work off of."

Join the conversation about this story »

NOW WATCH: How the 1999 Russian apartment bombings led to Putin's rise to power

As summer comes to the United States, the coronavirus is receding, businesses are reopening, and people are going back to work. There are memes everywhere trying to encapsulate the elation of the season — "hot vax summer,""the new Roaring 20s," etc. 

But on Wall Street, things are a bit darker. Among money men paid to predict the future, this will be the "Summer of Anxiety."

The peculiar nature of pandemic's economic recovery has made the next few quarters nearly impossible for even grizzled old-timers on the Street to forecast. Meanwhile, over in the stock market, retail traders stuck at home continue rewarding their favorite stocks for only-Christ-knows-what-reasons and jumping on momentum trades — corporate fundamentals be damned.

All of this is to say that Wall Street has found itself in limbo. No one knows how the economy will shake out after the strange dislocations caused by the pandemic are sorted, and no one knows if retail traders violently shoving stocks around will be here to stay once the world fully reopens.

There is so much uncertainty that Denise Schull — an author and psychologist who works with hedge fund managers and professional athletes— says her main trick these days is to get her worried Wall Streeters to take money out of the market and do less.

Or, as Bob Chapman, founder of Chapman Capital, said in an interview with CNBC last week: "To me it's time to go kitesurfing." He's lucky, of course. If you know Wall Street you know that not all money managers are well-adjusted enough to have a hobby.

Inflation — worse than bed bugs, scarier than Freddie Kreuger

There has never been a recovery like this one. This economic downturn was different from any in recent memory — people lost their jobs and businesses closed because they were required to do so. After losing 22 million jobs at the start of the pandemic, we still have to regain under 10 million jobs to get back on the country's pre-pandemic trajectory. This isn't steady going either. In March the economy created an incredible 916,000 jobs, only to crash down to a disappointing 266,000 new jobs in April, and then back up to 559,000 new jobs in May.

At the same time, US household savings rates reached record highs in March, boosted after the government handed out stimulus checks. But with the country partially in a pandemic shut down there were few places to spend them, so the money waited.

As we reopen there are shortages everywhere — for things like houses, cars,food, and, workers. Wages are going up as businesses try and lure workers, some of whom are choosing to wait to jump back into the job market because they still have children at home or until the vaccination rates get a bit higher. In Washington, the Federal Reserve is continuing to support the economy and the Biden administration wants to pass a $1 trillion+ infrastructure package.

What this all means is that inflation is here. Economists at the Federal Reserve say it will be "transitory"— that once all these pandemic dislocations normalize these price pressures will ease. For Wall Street's money men this is a hard story to swallow. "What the hell does 'transitory inflation' even mean," one worried client asked Shull.

Many older money men on Wall Street connect inflation with their youth — to the 1970s when slow growth and high inflation teamed up to ravage the economy. Near as I can tell, talking about the return of this combination, called "stagflation," makes them feel young again. Many younger money managers — having lived through the financial crisis and a world where too low inflation was a bigger worry — simply do not trust economists or the Fed to predict a future they themselves cannot see.

None of these people will sleep well until this period of uncertainty is over.

Trading from the cheap seats

Perhaps, given this lack of understanding of the future, it makes sense that the market has turned into a paradise for day traders — investors who buy and sell quickly. To a certain kind of person on Wall Street, this kind of trading is, at best, considered a gentleperson's game for dedicated hobbyists. At worst it's considered gauche — an amateurish way to play the stock market that does not require a fundamental understanding of a company's value or any real aptitude for math.

During the pandemic momentum took over the stock market, as retail traders used low cost platforms like Robinhood to throw money at stocks just because they were moving. Wall Street's staid tradition of exchanging ideas about a company's business prospects in air conditioned hotel ballrooms has been replaced with meme lords flooding Reddit with their favorite stock picks — regardless of any numbers of fundamental analysis — and shoving them higher in the market. 

This brings up an important question. What is the stock market for? Is it for sending capital to companies with the  best prospects and management team so that it can be put it to productive use? Or is it simply a video game for making traders money?

Take movie theater chain AMC, for example. The stock is up 2,321% (yes, that's a comma not a decimal) since the meme stock craze took hold in January. For many seasoned investors, it has become bringer of doom, running over short sellers and confounding fundamental analysis to no end. However, the business has few prospects. The company lost over $567 million in the first quarter of the year. Even before the pandemic AMC was in dire straits, and now holds $5.5 billion in debt on its books and owes $473 million in deferred rent. Worse yet, the entertainment industry has changed during the pandemic, doing deals that have more movies spending less time in the theater so they can head to streaming platforms.

None of these numbers matter to the loyal buyers of AMC's stock. Last week the company filed to would issue 25 million new shares in 2022. At the same time it issued a warning to any prospective buyers: Anyone who does, the company said, should be prepared to lose all their money.

For Wall Streeters trained to make the most beautiful model of how a business should operate this is utter, complete nonsense.

"People think it should be that companies that produce value have high stock prices, but it really only works that way because money managers have believed it should," Shull said. Now there is a powerful force in the stock market that does not believe it should work that way anymore. Money managers just have to deal with that, at least for now.

Of course, all of this could collapse any day. That's how bubbles work. It could be that, as everyone heads back to work, retail traders have less time to be vigilant about the prices of their favorite stocks, and that kills their momentum. It could be that the recovery stalls for some reason, maybe a vaccine-resistant variant of COVID. It could be that the Wall Street inflation nightmare comes true for a while, crushing stocks for a sustained period and washing out investors with weaker hands. It's also quite possible that the Biden administration is unable to push through more stimulative measures, and there's less money sloshing around the economy than investors had previously thought there would be. We'll know more about all of this in September at the earliest. 

In moments like this, when the future is so uncertain, it's a lot easier to think of the market in day-to-day increments. Shull told me that one of her clients — a veteran in the business — is making his analysts read Reminiscences of a Stock Operator, the story of 1920s day trading legend Jesse Livermore. They need to be reminded, she explained, that their job is not to build perfect models, it's to make money.

And right now making money means forgetting what they know, trusting the wisdom of Congress and the Fed to get things right, and chasing after a bunch of anonymous Reddit traders in the stock market. If that's not anxiety inducing, I don't know what is.

Join the conversation about this story »

NOW WATCH: How racism contributed to marijuana prohibition in the US

Cryptocurrencies are creeping into the traditional financial markets where hard, reserve currencies still rule the roost.

MicroStrategy raised the first-ever junk bond that will be used to buy bitcoin this week, as it looks to build a war chest of cryptocurrency. The software company's $500 million bond follows two convertible bond sales the company did in February this year and December 2020, which were both used to fund bitcoin purchases.

The transaction represents a certain recognition of cryptocurrency by conventional financial markets, and is a sign that investors are willing to make risky bets on the volatile upstart currency amid a search for greater returns in a world of rock-bottom interest rates. The managers funding the deal won't directly be invested in crypto, but the ability for MicroStrategy to repay the debt is entirely dependent on bitcoin's value.

While the deal obtained roughly $1.6 billion in demand, and enough traction to enable MicroStrategy to increase the sale by $100 million to $500 million, it was largely anchored by opportunistic hedge funds, multiple sources familiar with the sale told Insider.

Traditional asset managers or institutional investors, which typically invest heavily in new bond sales, are understood to have shunned the deal for MicroStrategy, sources have said, due to the risky nature of bitcoin.

"The deal was upsized, and oversubscribed, but bitcoin is just too volatile and unpredictable," said Peter Duffy, chief investment officer at Penn Capital, an investment firm focused on leveraged finance.

Hedge fund managers, bemoaning the dearth of higher returns on offer in bond markets, sense a chance to make some cash by flipping the securities in the secondary market.

"We bought a bit, but just to trade it. We don't care for the deal much," one credit manager told Insider. "It's a sign of the craziness of the high-yield [bond] market."

Bond managers' tough ride

Indeed, issuance in the high-yield bond market has surged since the Fed backstopped the market last March as the coronavirus gripped the economy. Companies have binged on cheap debt to stay afloat, while investors have had to assume greater risks for higher returns.

While investors who specialize in distressed securities were licking their chops at the outset of the pandemic, the wave of bankruptcies experienced last year didn't translate into easy wins for these managers.

Take Hertz for example — the bankrupt car rental company was able to ride a wave of retail investor interest to avoid a bailout from a vulture fund. The rise of SPACs in the latter half of 2020 and the beginning of this year gave companies another avenue for raising capital, with less restrictive terms than high-interest lenders from the hedge-fund world.

This culminated in heavy interest in MicroStrategy's offering despite the volatile status of bitcoin, with the manager who bought into the deal labeling it as "hedge fund heavy." This person said the last-minute rush to get in the deal — which pushed from $400 million to $500 million — was "high-yield FOMO."

All in on bitcoin

Cryptocurrency now makes up more than half of MicroStrategy's $6 billion enterprise value, according to a report from Reuters Breakingviews. Other bitcoin owners, including car maker Tesla, and payments company Square, hold just enough to account for 1% of their respective worths.

And while the price of a bitcoin token has lost more than $20,000 in value in the last month, it's not the only risky element of MicroStrategy's bond sale.

Moody's Investors Service said in a report Monday that MicroStrategy had "extraordinarily" high leverage. Its debt relative to the company's earnings was more than 20 times, according to Moody's calculations, but countered this with MicroStrategy's "very low" cost of borrowing. 

Jefferies led the transaction, which priced on Tuesday, and it's now trading in the secondary market.

A spokesperson for MicroStrategy declined to comment and a spokesperson for Jefferies did not respond to a request for comment before press time.

While traders will be fixed on any obscure hedge fund-led fluctuations in the securities, there's no denying bitcoin's growing influence.

On Wednesday, El Salvador became the first country to adopt bitcoin as official legal tender, while Warren Buffett invested $500 million in Brazilian fintech Nu Pagamentos, which plans to trade in bitcoin exchange-traded funds.

Join the conversation about this story »

NOW WATCH: A major supplier of fuel to the East Coast has been down following a cyberattack. This animated map shows all the major oil and gas pipelines in the US.

US hedge funds Melvin Capital and Light Street Capital, two short sellers hurt by the GameStop day-trader rebellion earlier this year, saw further declines in May, the Financial Times reported on Thursday.

New York-based Melvin, which lost more than 50% in January over its short positions on GameStop, lost another 4% last month, the report said, citing sources. That brings its overall losses so far this year to about 45%.

Meme stock short-sellers have continued to be squeezed as retail investors remain bullish on popular names like Bed Bath & Beyond, AMC, BlackBerry, and Clover Health. Total hedge fund losses from betting against this pack of stocks amount to $6 billion since the start of May, the FT said, citing data from Ortex Analytics. 

At the start of the year, a number of short-sellers lost over $5 billion as Reddit traders formed a snowballing momentum trade that caused GameStop shares to skyrocket. Shorting a stock means an investor is betting a company's share price will fall. The opposite of this is "going long," which reflects a belief the price will rise. 

Although the value of Melvin's assets fell $4.5 billion in January from the end of 2020, they have since recovered to $11 billion as of June 1, the FT reported. The fund closed out all of its public short positions, including GameStop and AMC, in the first three months of the year. But it could still have some traditional short positions that aren't required to be publicly disclosed.

Other funds with extended losses include Palo Alto-based Light Street Capital, founded by Glen Kacher, who started his career at billionaire Julian Robertson's famous fund, Tiger Management.

Light Street, which had about $3.3 billion in assets under management at the start of the year, was hit by losses on short positions in the first-quarter, the FT said. After losing a further 3% in May, its flagship fund is now down more than 20% this year.

Melvin Capital declined to comment on FT's report, while Light Street could not be contacted.

Join the conversation about this story »

NOW WATCH: Hate going to the theater? Here's how theaters are ruining the movie-going experience

Shares of a small Denmark biotechnology company surged as much as 1,387% in US trading hours Thursday as chatter about the stock jumped on Reddit's Wall Street Bets.

Orphazyme, which is researching treatment for rare diseases, closed the day 302% higher in the US. In Denmark Friday it continued to rally as much as 88%, according to Bloomberg data. 

On Thursday, the stock had about 450 mentions on the Wall Street Bets subreddit, making it the eighth-most mentioned company for the day, Quiver Quantitative data show. By comparison, AMC Entertainment had about 1,400 mentions and came in second.

Even so, the stock fell out of popularity on the subreddit Friday. On another thread, r/Stocks, several Redditors, confused at the stock move, questioned if it was a hedge-fund pump and dump. The company's American Depository Shares fell more than 50% in early morning trading Friday. 

In a statement about the share surge, the Copenhagen, Denmark-based company said it's not aware of any  material change in its programs, finances, or operations that would explain the stock move.

"Investors who purchase the company's ADS or shares may lose a significant portion of their investments if the price of such securities subsequently declines," the statement said. 

Per Hansen, an investment economist at Nordnet in Copenhagen, told Bloomberg there's not a logical explanation for the move, adding that GameStop and AMC aren't the only culprits of "strange, sudden, and inexplicable" price developments.

Meme stocks have seen a surge of interest in recent weeks amid renewed interest in movie-theater chain AMC Entertainment. As of June 9, retail traders had poured $1.27 billion into meme stocks over two weeks, matching the GameStop-craze inflows from earlier this year. 

This time around, the frenzy has expanded from meme-stock classics like GameStop, AMC, and BlackBerry, and extended to new and often lesser-known names, like e-commerce company ContextLogic, which was the most talked about stock Thursday, and iron-ore mining company Cleveland Cliffs. 

Join the conversation about this story »

NOW WATCH: How heart disease created America's wine industry

While billionaire Chase Coleman has pumped billions into the private markets this year, his flagship public-equity fund is down so far in 2021.

The flagship was down 6.3% in May, sources tell Insider, and has lost 0.8% for the year through May. Tiger Global's long-only fund lost 3.9% in May, but is up 4.3% for the year.

Several of Tiger Global's biggest holdings in China have struggled this year, including e-commerce giant JD.com and agriculture tech platform Pinduoduo. Though Microsoft and Roblox — the firm's second and third biggest holdings, according to regulatory filings — have increased in value this year. 

The average hedge fund, through the same timeframe, is up nearly 10% for the year after returning 1.7% in May, according to Hedge Fund Research.

The flagship returned 48% in 2020 in a banner that saw the manager return the most money— $10.4 billion — to investors last year of any hedge fund. The long-only fund meanwhile had an even better year last year, returning more than 65% for the year.

Tiger Global, which manages $65 billion across its different funds, declined to comment. 

The firm has been extremely active in the private markets to start the year, investing in more than 100 start-ups since the beginning of 2021. In early May, the tech-hedge fund was looking to raise a $10 billion fund from investors to keep scooping up deals, The Financial Times reported. Some of the names include Clubhouse, Stripe, and more. 

Join the conversation about this story »

NOW WATCH: How heart disease created America's wine industry

One of Reddit traders' hedge-fund targets — $3 billion Maplelane Capital — took a step back in May as it tries to dig out of its GameStop-caused hole.

The fund, run by former Galleon Group portfolio manager Leon Shaulov, lost 2.7% last month and is down roughly 39% for the year, sources tell Insider. The manager lost 45% in January thanks to a short position against GameStop, which had its stock inflated by legions of Reddit-connected retail traders who were targeting to short squeeze another hedge fund, Melvin Capital. 

Maplelane, similar to Melvin, had begun to claw back some of its losses brought on by the WallStreetBets crowd with a decent end to the first quarter. Bloomberg reported that the fund made 6.5% and 2.1% in February and March, respectively, to finish the first quarter down 39.5%, but two months later, the firm is still stuck at that figure. 

Melvin Capital also sustained losses in May as it tries to claw its way back from a 53% loss from GameStop short positions, among other shorts. The Financial Times recently reported that Gabe Plotkin's manager lost 4% last month to bring its year-to-date losses to just under 45%. 

Despite the poor performance this year, Melvin has raised its assets under management up to $11 billion, the FT reports.

Maplelane did not respond to requests for comment. 

Join the conversation about this story »

NOW WATCH: One bite from this tick could ruin red meat for you — or even kill you