Philippe Laffont’s $70 billion Coatue Management is gearing up to launch a new fund to wager on public and private artificial intelligence and tech innovation companies, a sign the firm is rethinking its long-only investing strategy as more startups stay private for longer.
The vehicle will act as a long-biased crossover fund, meaning it will wager on publicly traded companies, bet on late-stage growth startups and will have the ability to sell its positions and hold cash if it chooses, according to people familiar with the matter. Traditionally, long-only funds must remain fully invested.
The firm is closing its existing $8 billion long-only fund to new cash and instead directing interested investors to the new fund, said the people, who asked not to be identified discussing confidential information. The pool is expected to have about 20% exposure to private companies, and could launch as early as mid-year.
A representative for the firm declined to comment.
The move reflects Laffont’s view that traditional long-only stockpicking is becoming outdated, and doesn’t account for private companies that look and act like public ones, some of the people said. He has said that stock-pickers who don’t adapt risk missing out on greater returns.
“Years ago, there were so many IPOs, and now private companies stay private for longer,” Laffont said in an interview with Merrill in December. “So having some private exposure guarantees that you’re not concealing all those returns by waiting too long for those companies to go public.”
The crossover structure provides other benefits: while public stocks mark-to-market every day, private companies don’t. The latter “can absorb a little bit of the volatility of the public, but the public gives you liquidity along the way,” Laffont said in the interview.
Last year, Coatue launched its Coatue Innovation Strategies Fund, or CTEK fund, its first vehicle targeted to retail investors. It invests in public and private tech companies.
The CTEK fund has a greater tolerance for private companies, with the ability to invest as much as 50% of fund assets in such illiquid securities. Coatue raised $4 billion for CTEK, including $1 billion total from the family offices of Jeff Bezos and Michael Dell. The fund charges a 1.25% fee on managed assets and 12.5% on any profits made above a 5% gain, documents show.
The CTEK fund has exposure to Anthropic, after Coatue co-led a $20.5 billion funding round for the AI company, boosting its post-money valuation to $380 billion.
Coatue also wagers on private and public companies through its hedge fund — which has about 20% in privates and is currently Coatue’s biggest crossover fund. It also has a smaller Climate Tech crossover fund and has multiple venture capital funds that only back startups or late-stage growth companies.
Once-traditional stock-pickers have continued to shift toward embracing private markets — even after a massive correction four years ago in tech valuations led to double-digit losses across funds.
Many late-stage growth companies are choosing to delay going public for a number of reasons, including an abundance of private capital, active secondary markets and the ability to nab high valuations that may exceed what can be achieved through a public listing.
OpenAI and Anthropic, for example, have raised money at valuations of $840 billion and $380 billion, respectively. While Space Exploration Technology Corp., commonly known as SpaceX, is eyeing an IPO this year, the company has been private for 24 years.
“Many giant tech private companies now have a professionalism and sophistication that you don’t associate with a typical VC-backed startup,” said Matt Kennedy, senior strategist with IPO research provider Renaissance Capital. “Some have quarterly internal financial calls, do GAAP accounting, file registration statements with the SEC confidentially, or have higher liquidity of shares on the secondary market, which makes them start to sound more like a public company.”
Soaring assets
In recent years, Coatue has leaned more heavily into venture capital and growth equity, launching new funds and more publicly embracing an image as a startup investor.
It’s revamped its website from being an old-school hedge fund site with a secretive page showing just a static image and email address to one touting hundreds of portfolio companies, thought-leadership pieces and social media links. Coatue has positioned itself largely as a venture capital investor, with little mention of its hedge fund work.
Coatue’s assets have also swelled in recent years. In 2016, the firm ran $10 billion and grew that to about $60 billion by 2021, just before inflation and rising interest rates hit both public and private tech companies and valuations plunged. Coatue’s assets fell to $42 billion, though the dip was short-lived.
This year, its assets reached an all-time high of $70 billion, cementing its status among the world’s biggest hedge funds.
The vehicle will act as a long-biased crossover fund, meaning it will wager on publicly traded companies, bet on late-stage growth startups and will have the ability to sell its positions and hold cash if it chooses, according to people familiar with the matter. Traditionally, long-only funds must remain fully invested.
The firm is closing its existing $8 billion long-only fund to new cash and instead directing interested investors to the new fund, said the people, who asked not to be identified discussing confidential information. The pool is expected to have about 20% exposure to private companies, and could launch as early as mid-year.
A representative for the firm declined to comment.
The move reflects Laffont’s view that traditional long-only stockpicking is becoming outdated, and doesn’t account for private companies that look and act like public ones, some of the people said. He has said that stock-pickers who don’t adapt risk missing out on greater returns.
“Years ago, there were so many IPOs, and now private companies stay private for longer,” Laffont said in an interview with Merrill in December. “So having some private exposure guarantees that you’re not concealing all those returns by waiting too long for those companies to go public.”
The crossover structure provides other benefits: while public stocks mark-to-market every day, private companies don’t. The latter “can absorb a little bit of the volatility of the public, but the public gives you liquidity along the way,” Laffont said in the interview.
Last year, Coatue launched its Coatue Innovation Strategies Fund, or CTEK fund, its first vehicle targeted to retail investors. It invests in public and private tech companies.
The CTEK fund has a greater tolerance for private companies, with the ability to invest as much as 50% of fund assets in such illiquid securities. Coatue raised $4 billion for CTEK, including $1 billion total from the family offices of Jeff Bezos and Michael Dell. The fund charges a 1.25% fee on managed assets and 12.5% on any profits made above a 5% gain, documents show.
The CTEK fund has exposure to Anthropic, after Coatue co-led a $20.5 billion funding round for the AI company, boosting its post-money valuation to $380 billion.
Coatue also wagers on private and public companies through its hedge fund — which has about 20% in privates and is currently Coatue’s biggest crossover fund. It also has a smaller Climate Tech crossover fund and has multiple venture capital funds that only back startups or late-stage growth companies.
Once-traditional stock-pickers have continued to shift toward embracing private markets — even after a massive correction four years ago in tech valuations led to double-digit losses across funds.
Many late-stage growth companies are choosing to delay going public for a number of reasons, including an abundance of private capital, active secondary markets and the ability to nab high valuations that may exceed what can be achieved through a public listing.
OpenAI and Anthropic, for example, have raised money at valuations of $840 billion and $380 billion, respectively. While Space Exploration Technology Corp., commonly known as SpaceX, is eyeing an IPO this year, the company has been private for 24 years.
“Many giant tech private companies now have a professionalism and sophistication that you don’t associate with a typical VC-backed startup,” said Matt Kennedy, senior strategist with IPO research provider Renaissance Capital. “Some have quarterly internal financial calls, do GAAP accounting, file registration statements with the SEC confidentially, or have higher liquidity of shares on the secondary market, which makes them start to sound more like a public company.”
Soaring assets
In recent years, Coatue has leaned more heavily into venture capital and growth equity, launching new funds and more publicly embracing an image as a startup investor.
It’s revamped its website from being an old-school hedge fund site with a secretive page showing just a static image and email address to one touting hundreds of portfolio companies, thought-leadership pieces and social media links. Coatue has positioned itself largely as a venture capital investor, with little mention of its hedge fund work.
Coatue’s assets have also swelled in recent years. In 2016, the firm ran $10 billion and grew that to about $60 billion by 2021, just before inflation and rising interest rates hit both public and private tech companies and valuations plunged. Coatue’s assets fell to $42 billion, though the dip was short-lived.
This year, its assets reached an all-time high of $70 billion, cementing its status among the world’s biggest hedge funds.