As active mutual fund managers sought to distinguish themselves from index funds, more invested in unicorns -- private companies valued at more than $1B -- in the hopes of outperforming the market. That bet, for the most part, has backfired.
Funds owned $6.7B worth of shares in Uber, Lyft, Pinterest, We, and Peloton as of April, up $2.7B from two years earlier, according to Wall Street Journal analysis of valuation data.
About six out of 10 mutual-fund companies hold private shares in their portfolios vs. three in 10 five years ago, accounting firm Deloitte & Touche figures.
Stakes in closely held companies prove tricky to value. For example, Fidelity Investments valued the We Company (WE) at $102 per share in July 2018 and Hartford Financial (NYSE:HIG), John Hancock Investment Management, and Principal Financial Group (NASDAQ:PFG) put that value at $110 per share in November of the same year.
In March 2019, Fidelity marked down its We investment to $54 per share. In August, Jefferies Financial Group (NYSE:JEF) marked valued its We stake to about $38 per share, half of what it valued the stock in November.
Before We pulled its IPO last month, bankers were looking to price the offering at well below $55 per share, the WSJ reports, citing people familiar with the matter.
One unicorn, though, is paying off. More than 20 funds held shares in Pinterest (NYSE:PINS) as of March with a total value of $600M. The stocks has climbed more than 30% from its April IPO price.
Now read: Pinterest: Not Cheap Enough »
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