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Tech

Unicorn markups boost mutual funds

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Opening sequence

Tech

Unicorn markups boost mutual funds

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COMING UP:Unicorn markups boost mutual funds

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Transcript

00:00:00
>> Some big US mutual funds are betting on private tech firms like Uber and Pinterest and awarding them fat price tags. The big stakes in the large private companies are helping some beat their performance benchmarks and look better than their rivals. A play that's become so popular that several funds are boosting their stakes in pre-IPO companies to more than 5% of assets.
00:00:23
For example Betson, Uber and other unlisted companies helped the Hartford Growth Opportunities Fund deliver a 12.7% return in the year ending October 31st 2015, compared to peers who who saw an average 5% returns. All this attention from big funds is pushing large amounts of cash into the value of the Unicorns, the group of private companies valued at $1 billion or more, and has had a measurable effect in valuations.
00:00:50
Those that received such financing last year saw their valuations more than double compared to their previous funding round. But the enthusiasm comes with an obvious risk. Many are young companies that have yet to make a profit. They're also harder to price and to sell than publicly traded stocks.
00:01:08
The FCC has been monitoring this trend, asking mutual funds how they value their stakes in companies like Uber, Pinterest and Airbnb. The regulator is worried that investors, that's millions of American who are saving for their retirement, could get hurt in case of a sharp tech down-turn on companies not required to make much information available to the general public.