A little-known Tiger-affiliated hedge fund is quietly building up a sizable portfolio of private companies.
New York–based Falcon Edge Capital has invested more than $93 million in seven private companies in a portfolio of side pockets since April 2014. However, as of the end of May, these investments were worth more than $200 million, according to the firm’s May report sent to clients. Altogether, Falcon Edge manages about $3 billion in its hedge funds, collectively referred to as Falcon Edge Global Master Fund.
Falcon Edge was founded in 2012 by Richard Gerson, who is a so-called Tiger Grandcub because he was previously a founding executive at John Griffin’s New York–based Blue Ridge Capital. (Griffin worked at the famed Tiger Management Corp. before founding Blue Ridge.)
Falcon Edge is the latest in a growing number of funds with roots in Julian Robertson Jr.’s Tiger Management Corp. to allocate a sizable amount of assets to these inherently illiquid investments.
Falcon Edge does not identify the names of the private companies in which it has invested. It refers only to the company’s country and industry.
And not all of its private investments are included in its portfolio of side pockets. In fact, Falcon Edge was an early investor in Chinese e-commerce giant Alibaba Group Holding before it went public, including the investment among its “equity longs.”
As of May 31, five of the seven investments are making money. The two most recent investments are losing small sums, which is not surprising given the nature of illiquid investments.
However, on further examination, one investment clearly stands out from the pack and skews the seven-investment portfolio’s performance. Falcon Edge’s May report simply points out that in April 2014 it invested $25.5 million in a Chinese communications company. Today that company is worth more than $130 million. It is not clear what company it is, and Falcon Edge declined to comment.
Investors who chose to invest in the side pockets, as the private investments are called, benefited a lot more than those who declined. Through May, the hedge fund is down 3.3 percent, while the side pockets are up 20 percent. Those who invested in both are up 0.3 percent for the year. Virtually all of the gains in the side pockets were generated in April.
The hedge fund’s public long positions fared fairly well, rising 5.8 percent in the first five months of 2015. However, those gains were more than offset by losses of 8.7 percent in the fund’s short positions.
In 2014 the hedge fund fell by 1.4 percent for the year. However, those who also invested in the side pockets were up 5.1 percent last year thanks to two investments, one in China and one in India, “closing new rounds of funding at substantially higher valuations,” according to the firm’s fourth-quarter 2014 letter, obtained by Alpha. In 2013 the hedge fund was up 28 percent net of fees.
Although the firm won’t disclose the names of its private investments to its investors — at least not in its written communications — a search uncovers at least five of them. The most recent deal happened in April, when Falcon Edge reportedly invested about $20 million in Ola Cabs, an Indian competitor to Uber Technologies. Other investors in the company include New York–based Tiger Global Management, founded by Tiger Cub Charles (Chase) Coleman III.
Earlier this year it was disclosed that Falcon Edge led a new, $40 million fundraising round for NewsHunt, which is described as an India-based mobile news aggregation service. Interestingly, Falcon Edge’s May report says the firm made one investment in 2015.
Last year Falcon Edge participated in a $60 million funding for Foodpanda Group, which enables people to order food for delivery from a phone application. It also participated in a huge, $350 million Series C funding round for Koudai Gouwu, a Chinese mobile shopping app that is considered a competitor to Alibaba Group Holding. Also last year, Falcon Edge participated in a $90 million financing for Locon Solutions, which operates an online housing portal.
