Lone Pine’s Hedge Fund 44% Gain, Gone in One Quarter

Lone Pine’s lost summer

A fund built to be steady discovers that even caution has its limits

For the first half of the year, Lone Pine Capital could do little wrong. Its Cypress hedge fund, the vehicle founded by Stephen Mandel, had risen 44 per cent by the end of June, the sort of return that invites quiet admiration from rivals and rather louder questions from their investors.

Three months later, almost all of it had gone. A fall of roughly 30 per cent in the third quarter left Cypress up just 0.6 per cent through September. July did most of the damage, with the fund losing 25 per cent in a single month as a rapid sell-off in artificial intelligence and technology shares collided with tensions over Iran and a surge in the oil price. The broader market rout that followed caught several large hedge funds on the wrong side of their positions. Lone Pine was among them.

What stands out is how little shelter the portfolio offered. Core long holdings such as Nebius, ASML and Home Depot fell sharply. Mid-sized positions in MasTec, AppLovin and Corning fell further still. The short book, which exists precisely for moments like this, deepened the losses instead of softening them. The firm’s long-only fund, home to about three-quarters of its $19bn in assets, fared only marginally better, slipping from a 39 per cent gain at the end of June to 6.7 per cent by the end of September.

There is something almost unfair about it. Lone Pine has less exposure to conventional AI stocks than many of its peers, preferring industrials, consumer staples, financials, healthcare and materials. Three consecutive years of double-digit gains had earned it a reputation as one of the steadier hands in long-short investing. It is a reminder, if one were needed, that in a disorderly market diversification often proves to be less of a defence than it appears on paper.

The quarter closes with a departure, too. Kelly Granat, the firm’s long-serving chief investment officer, is leaving to join Gavin Baker’s Atreides Management. The task of rebuilding now falls to co-chief investment officers David Craver and Rahul Anne. They inherit a bruised portfolio, but also a firm that has recovered from hard seasons before.