Tiger Global wants to cash in on $40 billion portfolio of private companies

Technology-focused hedge fund Tiger Global is exploring cash alternatives to its more than $40 billion portfolio of privately held companies, according to people familiar with the matter.

The New York-based investment group is working with an advisor to tap the so-called secondary market to help return money to some of its investors, the people said.

Talks are at an early stage and potential buyers have said any deal would be complicated by difficulties valuing Tiger’s private holdings, which include stakes in companies such as payments business Stripe, US software group Databricks and China’s ByteDance, to name a few. people said.

Tiger declined to comment.

The decision to try and tap the private equity secondary market to generate cash highlights a growing problem facing private investment firms: how to return the money to its backers. Sources told the Financial Times that other large venture capital firms are also studying similar sales of parts of their private portfolios.

Over the years, investors in fast-growing companies like Tiger have been able to profit by taking the companies public. However, initial public offerings have slowed over the past 18 months as investors grappled with broader inflationary pressures and stock market volatility.

Globally, the amount raised through IPOs in the first quarter of this year fell 61 per cent to $21.5 billion from the same period last year.

In a recent quarterly letter to investors, Tiger expressed optimism that some of its large private holdings such as Databricks would be able to get listed when equity markets reopen for public offerings.

“Our largest private holdings are generally capital-efficient or profitable market leaders awaiting an appropriate window to complete a public listing,” it told clients in a first-quarter letter obtained by the FT.

The secondary market has become an increasingly popular tool to help firms return cash to their investors during public shutdowns. This enables firms to hold private companies for longer periods of time, which usually allows for a specific fund structure.

Secondary deals have increased in recent years. According to a report published by Raymond James, $105 billion worth of deals took place last year, nearly five times the value of transactions in the space a decade ago.

Founded in 2001 by Chase Coleman as a long-short hedge fund, Tiger aggressively expanded in the private markets in its early years, particularly in China. It eventually supported hundreds of fast-growing start-ups, including Alibaba and JD.com.

The FT reported in February that over the past decade, the firm’s portfolio of shares in privately held businesses grew to create assets of more than $60 billion.

Rising inflation and high interest rates brought early-stage firm investing to a judicious halt, as stocks of high-growth, speculative companies were quickly sold off.

This prompted investors in the private markets to write off investments in unlisted technology groups.

In 2022, Tiger’s flagship fund suffered its worst annual loss, losing over 50 per cent of its value, as Tiger reduced its unlisted holdings by nearly 20 per cent. However, some of its funds have registered marginal gains in unlisted assets this year.