Fidelity Investments isn’t the only mutual fund manager that has marked down some of its privately-held tech investments, based on a Coins2Day review of funds managed by The Hartford and T. Rowe Price. This new data is likely to exacerbate Silicon Valley concerns about taking money from mutual funds, and further a growing belief that startup valuations are beginning to diverge, rather than all rising in lockstep.
Unlike Fidelity, none of these other funds publish valuations on a monthly basis. But they do provide at least annual and semi-annual reports, usually including the number of shares acquired, when they were acquired, what was paid and present market value.
For example, the $1.4 billion Hartford Growth Opportunities Fund reports that, though the end of June 2015, it was carrying preferred shares of 10 privately-held companies below its original cost bases. Among them was daily fantasy sports site DraftKings (shares acquired in Dec. 2014), which The Hartford marked down 10%—months before its recent regulatory troubles. Also marked down by 10% compared to cost were shares in Pinterest that The Hartford had acquired in March. It also reported a 7.12% markdown for shares of cybersecurity company Lookout, compared to the purchase price one year earlier.
Then there was The Hartford’s investments in Docusign, which include five different classes of preferred stock. Four of those, all acquired in February 2014, are marked up. But the fifth, acquired in April 2015, is marked down 10%. Overall, the fund’s Docusign investment is up 23.4%. Pretty good, but it pales in comparison to the fund’s 130% mark-up for Uber shares it acquired in June 2014.
Here is the full data-set from the Hartford Growth Opportunities Fund:
Then there is the T. Rowe Price Global Technology Fund, a $2.4 billion mutual fund that also has reported valuations through the end of June 2015. Perhaps the most notable markdown from cost—albeit not a terribly surprising one—is digital note-taking service Evernote. T. Rowe wrote down Series 4 preferred shares acquired in May 2012 by 20%, and Series 5 preferred shares acquired in November 2013 by nearly 26%. More stunning was a 98.6% write-down (or is that a write-off?) Of Brazil’s Peixe Urbano, an online e-commerce company in which Baidu.com (BIDU) acquired a majority stake late last year.
On the upside, the fund is carrying early shares of Dropbox well above cost, and reports a 125% appreciation for its Series F preferred shares of Cloudera.
Below is the full data set from the T. Rowe Price Global Technology Fund:
T. Rowe Price also has a large group of privately-held companies within its $15.6 billion New Horizons Fund. The most notable markdowns from cost through June 2015 out of this fund—outside of Peixe Urbano—were for Glam Media (-80.64%) and LivingSocial (-97%). But perhaps the most notable change is one that didn’t occur: T. Rowe is carrying Lookout’s Series F stock at cost, even though The Hartford had marked down those same securities by 7.12%. Put another way: A lot of this is just guesswork.
It’s worth noting that this isn’t just about mutual funds. Venture capitalists historically have marked up their own companies to match follow-on financing valuations, but it has been happening less and less.
For example, Coins2Day has learned that one major Snapchat investor has been carrying the company below where Fidelity marked it down to. Moreover, a major Square investor has been carrying that company below the mid-point of its proposed IPO price range (which would be below the company’s last private round valuation).
Correction: The asset size of both T. Rowe Price funds were originally stated incorrectly.
