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Hedge Funds 101: History and Strategies of Tiger Cubs

This installment of Hedge Funds 101 dives into the history of the “Tiger Cub” hedge fund, their investment strategies and research process, and how to position yourself best to land one of the most coveted jobs in investing.

Tiger cub mascot
Robertson named his fund after the Thylacine, a carnivorous marsupial native to Tasmania, which is also commonly known as the Tasmanian Tiger.

Why is it called a Tiger Cub?

The Tiger Cub hedge fund gets its name from the pivotal Tiger Management hedge fund founded by Juilan Robertson. Tiger Management is widely considered the grand-daddy of the hedge fund industry, being one of the most successful and influential hedge funds in history.

Julian Robertson launched Tiger Management in 1980 with $8 million in initial capital. Initially, the fund focused on long-term value investments, employing a fundamental bottom-up approach to stock picking.

Under Robertson's leadership, Tiger Management achieved outstanding returns and quickly gained a reputation for its strong performance. The fund utilized a concentrated portfolio strategy, investing heavily in a select number of stocks believed to have significant growth potential. Robertson was known for his skill in identifying undervalued companies and for his meticulous research process, which was then adopted by much of the industry.

During the 1990s, Tiger Management experienced remarkable success, consistently generating high returns and attracting significant investor capital. The fund's assets under management (AUM) grew exponentially, reaching a peak of around $22 billion in 1998. At its height, Tiger Management was one of the largest hedge funds globally.

However, in the late 1990s, Tiger Management faced challenges. The fund incurred significant losses during the 1998 Russian financial crisis and struggled to recover. Additionally, Robertson expressed concerns about the increasing market volatility and what he viewed as an irrational exuberance in technology stocks during the dot-com bubble. Consequently, he decided to wind down Tiger Management in 2000, returning capital to investors.

In addition to the vast monetary success Robertson achieved, his legacy is defined by the hedge funds started by former investors who worked at Tiger Management. These hedge funds are often referred to as "Tiger Cubs" and include prominent names in the hedge fund industry, such as Chase Coleman (founder of Tiger Global Management), Stephen Mandel (founder of Lone Pine Capital), and Lee Ainslie (founder of Maverick Capital), among many others. Now nearly every single manager hedge fund that employs a deep research-oriented approach to investing is called a Tiger Cub, despite not having ties to Robertson.


What type of investment strategies do Tiger Cubs employ?

Tiger Cubs largely employ long/short (L/S) equities investment strategies. In this strategy, Tiger Cubs will go long (buy) equities (stocks) that they believe will appreciate in value and short (sell) stocks that they believe will decline in value. Compared to a Long Only fund or a mutual fund that just buys and holds stocks, Tiger Cubs short stocks to try to generate returns from declining stocks. Additionally, Tiger Cubs manage market risk by shorting stocks to help protect their funds from declines in the overall stock market. You can read more about the long/short investment strategy in a broader post on the subject.


How do Tiger Cubs research their ideas?

In order to decide which stocks to buy or short, Tiger Cubs perform deep research on the sectors and stocks of interest. Tiger Cub analysts will start with reading vast amounts of research from equity research firms and independent research firms. Additionally, Tiger Cub analysts are encouraged to build a large network of fellow investors to help find new investment ideas and bounce ideas off of their peers.

Once the analysts find an idea, they will perform their own independent research on the company, which typically includes performing countless customer and channel partner calls to better understand the industry and the company’s competitive positioning. Analysts will also build in-depth financial models where they try to model their investments better than even management can. They build these in-depth models through analyzing all types of company provided data and 3rd-party data (including credit card, macro, website/app traffic), and by applying their years of industry and financial expertise.


What is the team structure of a typical Tiger Cub?

Team structure can vary based on the age, size, and strategy of the fund. A typical, scaled fund will have the Portfolio Manager (PM), who is typically the founder, at the top, with Senior Analysts or Sector Heads below the PM. These Senior Analysts and Sector Heads can be in charge of a specific sector or groups of sectors to help divide up the investment universe of stocks and allow for building of sector expertise. Seniors Analysts and Sector Heads typically have an Analyst or 2 that works with them to help with the model building and diligence calls.

While the PM, Senior Analyst, Analyst structure is typical, you may find funds of different sizes and ages structured in more flat or hierarchical ways. You may find young funds where all of the Analysts work directly with the PM. You may have larger funds with multiple PMs or Sector Heads that work under the CIO/Founder of the fund (most notably Viking Global).


How do I get recruited for a Tiger Cub hedge fund?

You can tell what the path to the coveted Tiger Cub analyst role by looking at the path current analysts have taken. The typical Tiger Cub analyst has worked in Investment Banking and Private Equity before making the transition to Tiger Cubs. These analysts spend 2 years in Investment Banking, recruit on-cycle for a private equity associate role, and then recruit during their 2nd year of private equity. This path is commonly referred to 2x2.

Tiger Cubs target these 2x2 candidates as they have 4 years of training and experience financial modeling and understanding the basics of finance and investing. Additionally, in private equity, associates perform many of the same diligence items as analysts at hedge funds. Privae equity associates perform expert calls, ask management diligence questions, and analyze research from consultants and accountants. By hiring directly from private equity firms, Tiger Cubs can ensure they get the most experienced analysts who are ready to contribute day 1.

Analyst roles at Tiger Cubs are some of the most high-profile and sought after jobs on Wall Street. These jobs are a string board for a long investing career with high compensation. However they are some of the most competitive jobs on Wall Street that require hours of preparation and studying to ace the interviews. Even after you secure the job, analysts are constantly being judged and assessed for their pitches. Follow this blog for up-to-date news and advice on how to land hedge funds jobs and excel at them.


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