Months before Scott Shleifer stepped down as head of Tiger Global Management’s private investments, Chase Coleman had already begun to reclaim control of the firm’s $34 billion venture capital arm.
The founder sought more communication from Shleifer and his team and held meetings to discuss how to proceed after they plowed billions of dollars of client cash into hundreds of startups — just ahead of an industrywide slump. Coleman also spent this year engaging more with clients and founders of the firm’s portfolio companies.
Now, he’s taking over the unit that accounts for about two-thirds of the firm’s assets and has made Tiger a dominant force in startup investing. The move comes after some investors asked Coleman and other partners to get more involved in the wake of steep markdowns and has given many comfort that the firm seeks to correct the biggest misstep in its history, according to clients.
The rush to deploy almost $20 billion that Tiger raised near the height of the venture capital boom led to a 33% write-down of its private portfolio last year and an additional 6% this year, prompting questions about whether Coleman had let the firm spin out of his control. Tiger announced last month that Shleifer, the driving force behind the VC expansion, will transition into a senior adviser role — the most significant management shake-up since the firm’s founding in 2001.
“Tiger essentially was trying to deliver indexlike exposure to disruptive tech companies,” said Andrew Beer, co-founder of Dynamic Beta Investments. “The irony is that their aggressive investing may have fueled the bubble and hence contributed to subsequent losses.”
Shleifer, 46, will remain a partner and be a member of Tiger’s new venture investment committee, which will include several other partners and be led by Coleman, 48. The move puts the private book largely in the hands of the founder, who until now had been mostly overseeing the hedge and long-only funds, even though he had also been a co-portfolio manager of the venture business.
The firm has no immediate plans to appoint a new venture chief, said a person familiar with its thinking. A representative for New York-based Tiger Global declined to comment.
FLORIDA LIFE
In a letter to investors last month, Coleman said the decision was Shleifer’s and that his fellow billionaire wanted to remain with his family in Florida, while the firm now requires employees to work in its New York headquarters. The Sunshine State, a popular hub for the wealthy, doesn’t tax personal income, estates or capital gains.
The move diminishes the role of an executive who helped build a franchise that scored big wins with stakes in ByteDance Ltd. and JD.com Inc. and still boasts a net internal rate of return of 20% over 20 years.
“He is one of the true pioneers of the crossover-investing model,” Coleman said of Shleifer in the November letter.
Clients have expressed a range of opinions about the change.
Some said privately that Tiger should allow those who agreed to back its latest venture fund to cancel their commitments now that Shleifer is curtailing his involvement. The firm hasn’t fielded any such requests from investors, said a person familiar with the matter.
Then there are those who said they like that Coleman is reasserting control of a portfolio he oversaw in the firm’s first decade, while one said they’re angry that Shleifer is stepping away during difficult times. One client expressed regret for ignoring the fact that Tiger had been operating without a formal venture investment committee. Another gave the firm a pass, calling the recent VC push its first significant mistake after two decades of stellar returns.
Some clients of JPMorgan Chase & Co.’s wealth and asset management division, which had about $1.9 billion invested in last year’s giant Private Investment Partners 15 fund, are among those who were frustrated by Shleifer’s performance. It was their first opportunity to put money to work with the storied firm, which had posted years of outsize gains. Now, after the recent markdowns, they’re sitting on an 18% paper loss.
A representative for JPMorgan declined to comment.
As of June, PIP 16 had gathered just a third of its $6 billion target during a difficult fundraising environment. While the firm has had another capital raise since then, many institutional investors are limiting new VC and private equity commitments because they’re already overexposed to the asset class.