Technology-focused hedge fund Tiger Global is exploring options to cash out of some 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 adviser to use the so-called secondary market to help return money to some investors, the people said.
Some of the people said the talks were at an early stage, and potential buyers said any deal could be complicated by difficulties valuing Tiger’s private holdings, which include payments business Stripe, U.S. software group Databricks and China’s Shares in companies such as ByteDance.
Tiger declined to comment.
The decision to try to tap private equity secondary markets to generate cash highlights a growing problem for private investment firms: how to return money to their backers. Sources told the FT that other big venture capital firms have been exploring similar approaches to selling parts of their private portfolios.
Over the past few years, investors in fast-growing companies such as Tiger have been able to realize gains by taking their companies public. However, initial public offerings have slowed over the past 18 months as investors grapple with broader inflationary pressures and stock market volatility.
Globally, funds raised through IPOs fell 61% to $21.5 billion in the first quarter from a year earlier.
In its most recent quarterly letter to investors, Tiger expressed optimism that when the stock market reopens for public offerings, some of the largest private holdings, such as Databricks, will be able to go public.
“Our largest private holdings are typically capital efficient or profitable market leaders that are waiting for the right window to complete a public listing,” it told clients in a fourth-quarter letter obtained by the Financial Times. *
The secondary market has become an increasingly popular tool to help companies return cash to investors when public markets are closed. It can also allow companies to hold on to the private companies they own for longer than typical fund structures usually allow.
Second-hand transactions have exploded in recent years. According to a report by Raymond James, deals worth $105 billion were made last year, almost five times the value of deals in the sector a decade earlier.
Founded by Chase Coleman in 2001, Tiger started as a long-short hedge fund and aggressively entered the private equity market in its early years, especially in China. It eventually backed hundreds of fast-growing start-ups, including Alibaba and JD.com, among others.
Over the past decade, the company’s portfolio of stakes in private companies has grown, accounting for the bulk of its more than $60 billion in assets, the Financial Times reported in February.
Rising inflation and rising interest rates have brought the firm’s foray into early-stage investing to a screeching halt as shares of high-growth, speculative companies sold off sharply.
That has prompted investors in the private market to write down their investments in unlisted tech groups as well.
In 2022, Tiger’s flagship fund suffered its worst annual loss, losing more than 50% of its value as Tiger cut its unlisted holdings by nearly 20%. However, some of its funds have made small gains this year in unlisted assets.
*This story has been edited to correct the quarter in which the letter was sent