Some hedge funds face steep losses after betting on hot sectors

Some hedge funds face steep losses after betting on hot sectors

Hedge fund investors are bracing for a river of red ink as firms begin reporting returns for May when the stock market hovered near bear territory on disappointing earnings and worries about aggressive rate hikes, investors and fund managers said on Thursday.

Data from Hedge Fund Research shows the HFRX Global Hedge Fund Index slipped 1% in May, leaving it down 3.31% for the first five months of 2022. But preliminary numbers from some firms show far bigger losses, especially at funds that had invested heavily in technology and biotechnology stocks.

The broader S&P 500 index (.SPX) ended around flat for May, with the Nasdaq index (.IXIC) down 2%. However, during the month the S&P fell so far it nearly hit bear market territory. For the year to date, the S&P is down 12% and the Nasdaq down 21%.

Tiger Global, one of the industry's biggest firms, lost 14% in May, leaving it down 52% for the year, an investor said. The firm has lost money every month this year after slipping 7% in 2021.

Similarly, RTW Investments, one of the industry's hottest biotech funds, told investors that performance estimates for its RTW Flagship Fund including designated investments show the portfolio losing