Tiger Global Writes Down Venture Funds’ Bets by 33% in 2022


Tiger Global Writes Down Venture Funds’ Bets by 33% in 2022

WSJ: Tiger Global marked down the value of its investments in private companies by about 33% across its venture-capital funds in 2022, according to people familiar with the firm.SourceMoneyGuru-https://www.mgkx.com/3887.html

The markdowns erased $23 billion in value from Tiger’s giant holdings of startups around the globe, one of the people said. Its private portfolio includes big bets on hundreds of companies including TikTok parent ByteDance and payments company Stripe. In the fourth quarter, Tiger’s newest venture funds lost between 9% and 25%.SourceMoneyGuru-https://www.mgkx.com/3887.html

While substantial, the markdowns—including $9 billion in the second half of the year—highlight the lag in private markets compared with similar fast-growing public companies. Tech stocks fell sharply last year, yet large venture-capital investors have so far reported more modest declines.SourceMoneyGuru-https://www.mgkx.com/3887.html

SoftBank Group reported its $48 billion Vision Fund 2 saw a roughly 30% drop in valuations of its private investments between April and December, compared with a more than 50% drop in its publicly traded holdings.SourceMoneyGuru-https://www.mgkx.com/3887.html

The disconnect is partly explained by the tricky process of valuing private companies. Managers have wide discretion; they typically rely on recent transactions, fundamentals like revenue and the performance of comparable companies. They also often hold preferred stock, which gives investors protections if a company sells at a discount and often decreases in value at a slower rate than common stock.SourceMoneyGuru-https://www.mgkx.com/3887.html

Managers generally say they hew to consistent valuation processes, regardless of market cycles, that involve independent assessments of companies’ worth. Some question if public markets are a valid benchmark, contrasting the volatility of public markets with the longer-term nature of their investments in private companies.SourceMoneyGuru-https://www.mgkx.com/3887.html

Still, the lag in private-market valuations during a rout in technology stocks has drawn the attention of investors including Harvard University’s endowment, whose chief suggested in his annual letter last fall that venture managers hadn’t written down their private investments sufficiently. That could create a blind spot for investors deciding whether to invest in new funds managers are raising.SourceMoneyGuru-https://www.mgkx.com/3887.html

The recent write-downs at Tiger changed some of its performance stats significantly since it began raising a new $5 billion venture fund last fall.SourceMoneyGuru-https://www.mgkx.com/3887.html

When it initially sought investors for the fund, PIP 16, it reported that a $5 billion fund it raised in 2020, PIP 12, had generated a 22% internal rate of return for investors—a well above-average figure—through June 30.SourceMoneyGuru-https://www.mgkx.com/3887.html

That figure has fallen to 9%, people familiar with the matter said. Similarly, PIP 11’s internal rate of return has fallen to 13% from 23% over the same time frame. PIP 10’s decreased to 35%, from 39%.SourceMoneyGuru-https://www.mgkx.com/3887.html

Tiger subsequently shared updated performance metrics with prospective investors after taking additional losses in the third quarter, a person familiar with the matter said. Tiger regularly provides performance and portfolio data to existing and potential investors, the person said, regardless of the market backdrop.SourceMoneyGuru-https://www.mgkx.com/3887.html

All of Tiger’s largest investments have taken a hit, according to people familiar with the firm. When it began fundraising last fall, the firm told investors that its stake in payment processor Stripe was worth $1.6 billion as of June 2022. On Wednesday, Stripe said it raised $6.5 billion in a deal that valued it at $50 billion, nearly half of where it was in its last funding round two years ago.SourceMoneyGuru-https://www.mgkx.com/3887.html

Tiger reported far larger losses for the year in its flagship hedge fund and in its long-only fund, which invest heavily in public markets and focus on high-growth, largely unprofitable tech companies. Tiger lost 56% in its hedge fund and 67% in its long-only fund. The losses, though hefty, could have been worse: The funds include some private investments.SourceMoneyGuru-https://www.mgkx.com/3887.html

The write-downs of the private investments in the hedge fund and long-only fund were larger than for those in the venture funds, the person said.SourceMoneyGuru-https://www.mgkx.com/3887.html

Write to Juliet Chung at Juliet.Chung@wsj.com and Eliot Brown at Eliot.Brown@wsj.comSourceMoneyGuru-https://www.mgkx.com/3887.html SourceMoneyGuru-https://www.mgkx.com/3887.html




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