&l;p&g;With the Nasdaq more than doubling in five years, Philippe Laffont took the stage at the Forbes and Shook Research Top Advisors Summit in Las Vegas in February to talk about technology stocks. You would think an audience made up of hundreds of financial advisors would be used to hearing from hedge fund managers specializing in technology, but Laffont is something of a rarity in the hedge fund world these days.
&a;ldquo;I truly believe that in every portfolio you need to ask yourself what is going to be more relevant 5 to 10 years versus today,&a;rdquo; said Laffont to the group that is putting $500 billion to work. &a;ldquo;The most interesting trend is that technology, which used to be mostly software and semiconductors and obscure things, it&a;rsquo;s coming everywhere, it&a;rsquo;s the future of cars and the future of transportation and every sector.&a;rdquo;
&l;img class=&q;dam-image bloomberg size-large wp-image-35369716&q; src=&q;https://specials-images.forbesimg.com/dam/imageserve/35369716/960×0.jpg?fit=scale&q; data-height=&q;640&q; data-width=&q;960&q;&g; Philippe Laffont, founder and chief investment officer of Coatue Management. Chris Goodney/Bloomberg
By concentrating on what has been the most relevant sector in today&a;rsquo;s financial markets, Laffont has built his Coatue Management into a thriving firm that oversees $16 billion made up of hedge funds that trade tech stocks and vehicles that invest in private tech companies and startups. In an era when many hedge fund managers have struggled, few have successfully put together sector specific firms focusing on tech.
Laffont has done it by being consistent and careful amid tech booms and busts. He is not an overwhelming tech promoter. At his February Las Vegas talk, Laffont was not pounding the table for tech stocks, saying &a;ldquo;you have a backdrop of stocks not being particularly cheap and not particularly expensive.&a;rdquo;
In Coatue&a;rsquo;s own portfolio, Laffont has played things cautiously. When tech stocks slumped in the winter of 2017, he increased his exposure to them and benefitted when tech stocks surged as the year went on. Then he hedged his own tech bets in the latter part of 2017 and the start of 2018, lowering his net exposure. Last year Laffont&a;rsquo;s $9.2 billion hedge fund returned 25% net of fees, edging out the broader stock market as measured by the Standard &a;amp; Poor&a;rsquo;s 500, but trailing the Nasdaq&a;rsquo;s 29.6% return. Over the last ten years, Coatue&a;rsquo;s main hedge fund has generated an annualized return of 10.1%.
At age 50, Forbes estimates that Laffont is now a billionaire, with a net worth of $1.4 billion. The firm he runs, Coatue, looks a lot like billionaire Chase Coleman&a;rsquo;s Tiger Global Management, a $22 billion firm with hedge fund and venture capital vehicles that focus on technology. Despite the tech boom of the last decade, there are no other hedge fund firms that resemble Coatue and Tiger Global in size and tech scope.
Coleman and Laffont are good friends and competitors. Both started out as analysts at Julian Robertson&a;rsquo;s legendary Tiger Management hedge fund firm. They also work out of the same Manhattan building, separated by only 10 floors. Like Coleman, Laffont tries to avoid publicity and stay under the radar. He declined requests to comment for this article.
Born in Belgium, Laffont liked to tinker with computers while growing up in France, according to a &l;a href=&q;https://www.onewire.com/Videos/Philippe-Laffont-Coatue-Management&q; target=&q;_blank&q;&g;video interview he gave to OneWire&l;/a&g;. He left France to attend the Massachusetts Institute of Technology, graduating in 1989 with a computer science degree. Laffont, who still retains a strong French accent, spent three years working as a management consultant and followed his future wife to Spain, working at her family&a;rsquo;s company.
Stuck in a basement office in Spain, Laffont started following daily stock quotes in the newspaper and investing in big tech companies like Microsoft and Intel with his brother, Thomas Laffont. Since it was the mid 1990s, the positions of the Laffont brothers soared along with the bull market. Laffont was hooked. &a;ldquo;If the market had gone down the three years I did this I would have for sure given up,&a;rdquo; Laffont told OneWire.
Returning to the U.S. intent on working in asset management, Laffont worked for free at a tiny mutual fund shop. Through a friend, he got a short meeting with Julian Robertson, who hired him as an analyst to work at Tiger Management on European telecommunications stocks.
After three years at Tiger, Laffont raised $45 million in 1999 and founded Coatue to invest in technology, media and telecom. He named his firm after a long-barrier beach off the coast of Nantucket, where he frequently vacationed. It was a great time to raise money for a tech-focused hedge fund. The Nasdaq was going crazy. But within a few months, tech stocks crashed and the Nasdaq tumbled by 80% during Coatue&a;rsquo;s early years.
Laffont withstood the dot.com wreck, building a brand as a solid tech investor. He went long tech stocks, focusing on technological themes, and short companies with businesses that were being disrupted by new technological waves. He hired his brother, Thomas, who was working as an agent for Hollywood movie actors, and for a while his father worked as Coatue&s;s chief financial officer.
With his fund losing 14.1% in 2008, Laffont got noticed for playing decent defense during the financial crisis. At the start of 2009, he was managing $2.2 billion and began raising more serious money. The hedge fund he constructed would eventually hire 15 people for its public investing team&a;mdash;11 analysts and 4 partners&a;mdash;with Laffont keeping tight control and making final investment decisions as the only portfolio manager.
On Wall Street, Laffont is known for his intelligence and for being an exacting boss who churns through analysts. One of Laffont&a;rsquo;s key moves was dispatching his brother, Thomas, to Silicon Valley in 2012 to open an office and prowl for growth-stage startup investments like Box, which Coatue invested in at $1.2 billion valuation. &a;nbsp;Laffont was following in Chase Coleman&a;rsquo;s footsteps, whose Tiger Global famously invested in Facebook well before its 2012 initial public offering.
Tiger Global and Coatue quickly became important Silicon Valley players. Like Coleman, Laffont has set up venture capital vehicles to buy dozens of stakes in tech companies prior to their IPOs, such as Snap, Lyft, Didi Chuxing and Instacart. Some of these deals have been very lucrative and the three Coatue venture vehicles, which now manage $5.2 billion, have helped Laffont diversify his business and build a larger firm.
A few years ago, Laffont also launched a long-only fund. But the hedge fund remains core to Coatue. A look at the firm&a;rsquo;s filings with the Securities &a;amp; Exchange Commission reveals big recent positions in Broadcom, Facebook, Apple, Amazon, Nvidia and Shopify, the kind of names you would expect to see in a tech-laden U.S. stock portfolio. But Laffont tries to distinguish Coatue&a;rsquo;s portfolio by investing in themes, like China, artificial intelligence and facial recognition technology. He has &l;a href=&q;https://www.forbes.com/sites/antoinegara/2018/02/28/exclusive-top-hedge-fund-manager-philippe-laffont-thinks-a-i-will-transform-intel-and-twitter/#5601e4326025&q;&g;described his &l;/a&g;thinking&a;nbsp;as betting on &a;ldquo;platforms and moonshots.&a;rdquo;
One position that worked last year for Coatue was Hangzhou Hikvision Digital Technology, the world&a;rsquo;s largest maker of surveillance cameras that is partly owned by the Chinese government and is listed on the Shenzhen Stock Exchange. The company has developed equipment that uses facial and behavior recognition technology, which has become ubiquitous in China, along with software to manage its system.
At the Forbes/Shook summit in Las Vegas, &l;a href=&q;https://www.forbes.com/sites/antoinegara/2018/02/28/exclusive-top-hedge-fund-manager-philippe-laffont-thinks-a-i-will-transform-intel-and-twitter/#5601e4326025&q;&g;Laffont emphasized his belief that artificial intelligence is a game changer&l;/a&g;, pointing to Intel and Twitter as companies he believed would benefit from AI, adding that he aims to have over 20% of his portfolio made up of companies exposed to AI. &a;ldquo;It is the absolutely most interesting and biggest trend since the Internet,&a;rdquo; Laffont said.
Laffont also believes these technological advances can apply to his own business. He has hired quantitative researchers who are using big data techniques as part of a quantitative trading effort at Coatue.
Laffont also recently hired James &a;ldquo;JK&a;rdquo; Brown, the former investor relations chief at Och-Ziff Capital Management, which not long ago was known for being a fundraising machine. So far there have been no signs that Laffont is planning to raise large amounts of new capital at Coatue, but the firm is starting to emerge from the shadows. Laffont announced Brown&a;rsquo;s hiring this week in Coatue&a;rsquo;s first ever press release.
&l;em&g;With additional reporting by Antoine Gara.&a;nbsp;&l;/em&g;&l;/p&g;