Cadian Capital Management, a hedge fund focused on technology, media, and telecommunications, is experiencing significant losses this year. The fund's performance in 2023 is expected to be its worst since 2021, with a decline of 10 percent in September and year-to-date losses of 15 percent. This is disappointing for investors, especially considering the strong performance of the tech-heavy Nasdaq, which has risen over 23 percent this year.
Cadian Capital Management has historically differentiated itself from other funds by avoiding investments in well-known tech stocks. This strategy allowed the fund to perform relatively well during the market downturn of 2022, losing less than 2 percent while other tech-focused funds suffered losses of 30 to 50 percent. However, the current trajectory suggests that Cadian's performance in 2023 may not be as resilient.
Founded in 2007 by Eric Bannasch, Cadian Capital Management focuses on smaller and midcap stocks that are often overlooked by mainstream tech investors. The fund's portfolio does not include any widely held hedge fund stocks, and its 29 U.S.-listed common stock long positions feature few recognizable names.
Planet Fitness, a health club chain, was the fund's largest long position in the first quarter but fell to the third spot after a significant reduction in the second quarter. Braze, which became the largest long position by the end of the second quarter, contributed to the fund's disappointing September performance with a 28 percent decline following a lackluster earnings report.
Cadian's other significant holdings, such as Criteo and Elastic, have also contributed to its struggles. Criteo experienced a 15 percent drop in September but remains up 60 percent for the year. Elastic has seen a 32 percent decline year-to-date. Remitly Global, another holding, dropped nearly 2 percent last month and is down 31 percent for the year. On the other hand, Varonis Systems, the fund's second-largest long position, remained stable in September and achieved a 25 percent increase for the year. The mixed performance across the portfolio highlights the volatility and unpredictability of investments in the tech sector.
The recent losses of Cadian Capital Management raise questions about investor sentiment and the effectiveness of its investment strategy. While the fund has historically avoided the pitfalls that have affected many tech-focused funds, the current losses suggest that its approach may need to be reevaluated. Investors will be closely monitoring the fund's next moves as the tech sector continues to evolve.
The performance of Cadian's holdings in contrast to the rising Nasdaq underscores the challenges faced by funds that prioritize niche investments over established tech giants. The coming months will be critical for Cadian as it seeks to recover from its losses and regain investor confidence.