According to sources familiar with the situation, Tiger Global, a technology-focused hedge fund that manages more than $40bn in privately owned companies is looking at options to sell a portion of this portfolio.
According to the sources, the New York-based investment firm is working with a consultant to tap into the secondary market in order to return some money to its investors.
Some people have stated that the talks are still at an early stage. Potential buyers said any deal would be complicated by difficulty valuing Tiger’s private holdings. These include stakes in businesses such as Stripe Payments, US software group Databricks, and China’s ByteDance.
Tiger declined comment.
The decision of private investment firms to tap into the secondary private equity market in order to generate cash is a sign that they are struggling to find a way to repay their investors. Other large venture capital firms are also examining similar sales of private portfolios, according to sources.
Investors in fast-growing firms such as Tiger were able to make gains over the past few decades by making their companies public. Initial Public Offerings, however, have decreased over the last 18 months due to increased inflationary pressures.
The amount of money raised by IPOs worldwide in the first three months of this year dropped 61 percent to $21.5bn compared with the same period last year.
Tiger, in a recent letter to investors, expressed its optimism that certain of its largest private holdings like Databricks will be able list once the equity markets are reopened to public offerings.
In a letter to clients obtained in the fourth quarter, it said: “Our biggest private holdings tend to be capital-efficient or profit-making market leaders that are awaiting a window of opportunity for public listing.”
Secondary markets are becoming more popular as a way for firms to return cash to investors when the public market is closed. The secondary market can allow firms to keep private companies that they own for longer than is usually possible with a fund structure.
In recent years, secondary deals have increased. According to a Raymond James report, deals worth $105bn have been struck in the last year. This is nearly five times more than the transactions made a decade earlier.
In its early years, Tiger, founded in 2001 by Chase Coleman as a hedge fund that specialized in long-short trading, expanded aggressively, especially in China. It backed hundreds fast-growing startups, including Alibaba and JD.com.
In February, the company reported that over the last decade, its portfolio of stakes held in privately-held businesses has grown to be the majority of its assets of more than 60bn.
The firm’s early-stage investment push was halted by rising inflation and interest rates, as shares of high-growth speculative firms fell sharply.
Investors in the private market also wrote down their investments in non-listed technology companies.
Tiger’s flagship fund, the Tiger Fund, suffered its biggest annual loss in 2022. It lost more than 50% of its value, as Tiger reduced its unlisted assets by almost 20%. Despite this, some of Tiger’s funds recorded modest gains in unlisted assets.