Technology-focused hedge fund Tiger Global is exploring options to cash out a portion of its more than $40 billion portfolio of private companies, according to people familiar with the matter.
The New York-based investment group is working with an advisor to tap into the so-called secondary market to help return money to some of its investors, the people said.
The talks are in an early stage and prospective buyers said any deal would likely be complicated by difficulties valuing Tiger’s private holdings, which include stakes in companies such as Stripe, US software group Databricks and China’s ByteDance, some said. people.
Tiger declined to comment.
The decision to try to leverage the secondary market in private equity to generate cash highlights a growing problem private investment firms are facing: how to pay money back to their lenders. Sources told the Financial Times that other large venture capital firms have also studied similar sales of parts of their private portfolios.
In recent years, investors in fast-growing companies like Tiger have been able to make gains by going public. However, initial public offerings have slowed over the past 18 months as investors grapple with wider inflationary pressures and equity market volatility.
Globally, the amount of money raised through IPOs in the first quarter of this year fell 61% to $21.5 billion compared to the same period last year.
In a recent quarterly letter to investors, Tiger expressed optimism that some of its large private holdings like Databricks would go public when stock markets reopened for public offerings.
“Our largest private holdings are generally capital-efficient or profitable market leaders pending an appropriate window to complete public listings,” he told clients in a fourth-quarter letter obtained by the FT.*
The secondary market has become an increasingly popular tool to help companies return money to their investors while public markets have been closed. It can also allow firms to keep their privately-owned companies for longer periods than a typical fund structure would normally allow.
Side deals have increased in recent years. Last year, $105 billion worth of deals were closed, nearly five times the value of transactions in the space of a decade earlier, according to a report released by Raymond James.
Founded in 2001 as a long-short hedge fund by Chase Coleman, Tiger aggressively expanded into private markets, particularly China, in its early years. He eventually backed hundreds of fast-growing startups including Alibaba and JD.com, among others.
Over the past decade, the firm’s portfolio of stakes in private companies has grown to make up the majority of its more than $60 billion in assets, the FT reported in February.
Rising inflation and higher interest rates brought the company to an abrupt halt in the company’s early-stage investment drive, as shares of speculative high-growth companies sold off sharply.
This has prompted investors in private markets to devalue investments in unlisted technology groups as well.
In 2022, Tiger’s flagship fund suffered its worst loss of the year, losing more than 50% of its value as Tiger reduced its unlisted holdings by nearly 20%. However, some of its funds have posted small gains this year for unlisted assets.
*This story has been edited to correct the quarter in which the letter was sent
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