Glade Brook Capital Partners has created a new fund — Glade Brook Private Investors VIII — designed for the firm’s private arm to make its newest investment.
As we have noted earlier, in recent years the Greenwich, Connecticut, firm, headed by Paul Hudson, has morphed from a mostly hedge fund firm to a predominantly private equity/venture capital operation. At year-end Glade Brook had about $1.1 billion, which included $310 million in its public equity vehicles and $775 million in private equity.
Last year the firm launched Glade Brook Private Opportunities Fund, designed to invest in four to six private “big global ideas,” according to its offering document.
We earlier reported the fund made significant investments in Uber Technologies and Snapchat, the social media company.
It subsequently made smaller investments in WeWork, a company that offers shared work space in nine countries, with several more in the works, and the Honest Co., which was co-founded by actress Jessica Alba to sell nontoxic household products.
As part of its strategy, whenever the Private Opportunities Fund makes a new investment, Glade Brook creates a new fund or vehicle for it. Hudson also sometimes allows investors to co-invest with the fund, depending on the situation.
For instance, the newest fund was created to invest in Glade Brook’s second financing for Snapchat.
Glade Brook declined to comment.
Snapchat has been a controversial private investment. Late last year Fidelity Investments drew a lot of attention when the Boston-based mutual fund company marked down the value of its position in the social media company.
However, according to sources, Glade Brook, which uses a third-party firm to value its private investments each quarter, has not marked down the investment. It is said to believe Snapchat is one among just a handful of new companies that are creating huge businesses.
Some investors believe that younger users are moving away from Facebook and toward social media companies like Snapchat and Instagram, which they think are doing a better job of monetizing their platforms than they did in the past.
Remember, mutual funds must mark their assets to market every day, unlike hedge funds, private equity funds and venture capital funds.
And Glade Brook’s bullishness on Snapchat is partially attributable to the fact that it is investing in the company for the second time.
Interestingly, Facebook remains one of Glade Brook’s largest long positions in its hedge funds — Glade Brook Global Domestic Fund and Glade Brook Global Offshore Fund — which were up 13.2 percent last year but fell by about 10 percent in the first quarter of 2016.
One major reason firms like Glade Brook have long positions in Facebook is that it owns Instagram, WhatsApp Messenger and Messenger, which have grown into popular platforms in their own right.
In fact, in its year-end letter to hedge fund clients, Glade Brook wrote that in the fourth quarter, “Facebook began to ramp up the monetization of the Instagram platform and continues to scale Whatsapp and Messenger” toward a billion-plus users, “all of which represent large potential future revenue opportunities for the company.”
So, Glade Brook places its bets on the future of social media on the public and private sides.
