Hedge fund Coltrane Asset Management earned a 223% return by betting against overpriced technology stocks, according to a Tuesday report from The Wall Street Journal.
Mandeep Manku, a managing partner at the fund, began shorting tech stocks in 2020 after he saw that many were trading at more than ten times their revenues. Though the fund lost 56% in 2020 and gained 19% in 2021, Coltrane — left managing less than $200 million of its previous $1 billion in assets — then reaped 223% so far this year as tech stocks collapsed.
“In our industry, lots of people who ended up right weren’t able to be there when they were right because they were closed out or clients took their money away,” Coltrane investor Stuart Roden told the Journal.
Indeed, as the stock market has declined more than 19% since the beginning of the year, growth industries like technology — which historically have produced short-term yields rather than long-term results — have suffered the most, while value industries like energy have reaped the strongest returns. Companies such as Microsoft, Lyft, and Tesla were the first to lay off significant portions of their staff or slow hiring as the stock market began its tailspin.
For instance, iShares’ ESG Aware MSCI ETF — which has its largest holdings in companies like Apple, Microsoft, Amazon, and Tesla — is down nearly 20% since the beginning of 2022, slightly lower than the overall S&P 500 index. Meanwhile, iShares’ Global Energy ETF — dominated by oil and gas conglomerates like Exxon Mobil, Chevron, and Shell — has risen more than 18% over the same period.
“Success is about having a consistent approach that’s true to your world view, staying grounded and calm,” Manku said in a statement, per the Journal. “We are still very much at the beginning of our journey but have, we hope, learned a few valuable lessons already.”
The implosion of tech stocks has further called into question the validity of Environmental, Social, and Governance (ESG) investing, through which asset managers pour money into firms with leftist values — such as technology companies — rather than purely pursuing profits.
“If ESG vendors would openly admit that they were moving their gaze away from the pursuit of returns for their clients, it would be more defensible,” Jerry Bowyer, who serves as a senior fellow at the Center for Cultural Leadership, told The Daily Wire. “Clients would then know that they’re likely making a little offering to the gods of social responsibility in the form of lower returns. But what has happened is that the ESG industry has pretty consistently denied the return sacrifice and engaged in highly speculative arguments that ESG is good for shareholders.”
When left to their own devices rather than allocating their capital to large asset managers, American investors tend to avoid ESG, according to a recent Daily Wire poll conducted by Echelon Insights. While 29% of respondents agreed it is a “good thing” for companies to use their financial power for political or social means supported by executives, 58% — twice as many — said it is a “bad thing.”
“The ESG movement’s realization that shunning traditional energy companies sacrifices profits proves what everyone else already knew: virtue signaling isn’t free,” entrepreneur Vivek Ramaswamy, who recently launched an asset management firm centered upon “excellence capitalism,” told The Daily Wire. “Large asset managers are desperate to go back to the days of investing money to make money, but their hands are tied by the ESG rope of their own making.”