Latest Tiger Drama
As a latest update, our investigation shows that many PIP 16 limited partners are upset with how Tiger Global structured Shleifer’s ongoing transition out of the firm and have expressed frustration that Tiger Global intentionally violated the spirit of the key man clause in Section 2.2 of PIP 16’s limited partnership agreement, which several of the PIP 16 LPs we spoke with provided, whereby Shleifer and Coleman are both listed as the “key men” for the funds. Typically, under any fund’s limited partnership agreement, when the head of the entire business steps down a few months after the fund’s first close, a key man clause would be triggered enabling the fund’s limited partners to vote to terminate their commitments. Our investigation shows that within several private placement memoranda for Tiger Global’s funds, Coleman and Shleifer were both listed with equal titles as “portfolio manager of the firm’s public equity and private equity businesses,” and Shleifer had the additional title of “head of the firm’s private equity business,” a title that Coleman did not hold. In his role as head of the PIP funds, Shleifer was responsible for approving most PIP investments and leading PIP fundraising activities.
When Shleifer, the sole head of the private equity business under which the PIP funds sit and one of the two portfolio managers for every Tiger Global fund (both public equity and private equity), experienced a meaningful change in his position (losing both the head of private equity business title and co-portfolio manager title) as part of his transition out of the firm, there is no question that LPs should be provided with the right to cancel their PIP 16 commitments according to several PIP 16 LPs that we spoke with as part of our investigation. Several PIP 16 LPs stated that they had interpreted the key man clause in the PIP 16 limited partnership agreement to mean that if Shleifer was no longer running the PIP 16 fund as he had in prior PIP funds, then the key man clause would be triggered. However, by quickly throwing together an investment committee and placing Shleifer on it, Tiger Global structured Shleifer’s transition in a manner that makes it appear at surface level that Shleifer will retain active involvement in Tiger Global for the life of PIP 16 (the next 10 years) even though that is not expected to be the case. According to our strict reading of Section 2.2 of the fund’s LPA, if Shleifer still retains the partner title with Tiger Global then the key man clause is not technically triggered.
Our investigation concludes that many PIP 16 limited partners simply cannot get over the timing of Shleifer’s transition out of his roles as head of the investment firm’s private equity business and portfolio manager of all the investment firm’s different funds so soon after PIP 16’s first close. While it may appear that the PIP 16 LPs were led to believe one thing by Tiger Global before they committed to PIP 16 and then told another thing after they committed, some of the LPs believe internal circumstances at Tiger Global simply changed after the PIP 16’s first close, particularly given the allegations in the viral “memo” from August. However, even if that is the case, some of these PIP 16 LPs believe that given circumstances changed so dramatically in only a few months after they made their commitment and the fund’s leadership composition has been fundamentally altered, LPs should be provided with the option to cancel their commitments with no management fees charged. Our investigation concludes that if this transition occurred say 5 years into PIP 16’s life, then Tiger Global’s handling of the situation would likely be more acceptable to PIP 16 LPs; however, the fact that this leadership transition has occurred so soon after the first close of PIP 16 and directly in the middle of PIP 16’s fundraise is frustrating for many.
A few PIP 16 LPs have complained during our investigation that it is unethical for Tiger Global to take this approach of insisting that PIP 16 LPs honor their commitments to the new fund and that as a result, these LPs won’t be investing in any of the firm’s future funds. One of these LPs stated that they had given Tiger Global the benefit of the doubt despite its bad returns and overall drama associated with the firm by investing in PIP 16 (albeit at a smaller commitment than the past PIP fund) and yet are now being treated in an unethical manner with the firm insisting that they don’t have to allow for commitments to be canceled under the PIP 16 limited partnership agreement. Worse yet, Tiger Global is telling limited partners that complain on 1x1 calls with the firm that no other LP is asking for a PIP 16 redemption and that they are alone in their frustration. However, several LPs that we spoke with have said they sync up with other Tiger Global LPs regularly and know that many of them have made the same request of Tiger Global. According to some LPs, Tiger Global’s attempt at gaslighting them will be relationship ending.
While the PIP 16 LPs we spoke with as part of the investigation generally still think highly of Shleifer, none believe his transition was his own decision. Tiger Global had been Shleifer’s main focus in his 25-year life and a primary source of his sense of self-worth according to several long-time Tiger Global LPs. There is no scenario in which he would have voluntarily stepped down at this particular moment – right in the middle of a fundraise. Also, through our broader research, we are not aware of a key man being transitioned out or demoted in the middle of any fundraise at any other investment firm, and it is commonly known that a leader of an investment firm becoming a “Senior Advisor” is code that they are transitioning out of active day-to-day involvement with the fund.
Given the clear consensus around whose decision it was for Shleifer to step down, the main question LPs are grappling with is what actually occurred internally at Tiger Global that ultimately resulted in Coleman changing Shleifer’s status as sole head of the private equity business and co-portfolio manager of every Tiger Global fund (both public equity and private equity) in the middle of PIP 16 fundraising. Some Tiger Global LPs say the change was motivated by Shleifer’s poor investment performance as of late with his Tiger Global Long Opportunities fund having declined more than 70% in 2022. Others say the change was driven by many of the cultural issues cited in the “memo.” A third rumor that has been discussed by some LPs is that Shleifer, who was feeling professionally and personally insecure due to his investment performance and the allegations in the “memo,” adopted an “offense is the best defense” mentality and attempted to stage an internal coup at Tiger Global and cement leadership power with himself at Coleman’s expense. However, Coleman who controls Tiger Global’s management company was able to convince the firm’s other partners to side with him and thwart Shleifer’s coup, leaving Shleifer’s continued position at Tiger Global untenable. While all three scenarios cited by Tiger Global LPs are plausible drivers of Shleifer’s transition, we are in the process of researching what exactly transpired. Additionally, it has come to our attention that several parties are investigating Tiger Global for wrongdoing. One party, the law firm Miller Shaw, posted on its website on December 14th that it is investigating Tiger Global given Shleifer’s transition.
Interestingly, according to several Tiger Global LPs, Shleifer was the best addition to Tiger Global in its history, and some LPs said it is unclear if Coleman would have ever turned Tiger Global into a multi-billion dollar investment firm without Shleifer’s involvement. Some of these limited partners have pointed out that Shleifer would often comment at various points over the last two decades that Coleman is “not a classically trained investor” – having never been trained at an investment bank or private equity firm to understand basic financial modeling skills and investing tenets – unlike Shleifer who worked for three years at investment powerhouse Blackstone. One Tiger Global LP has noted that if Coleman thinks that Tiger Global’s investment performance or internal culture will be better without Shleifer, then he should have fully exited him from the organization and provided PIP 16 investors with the option to cancel their commitments. If instead Coleman believes that Shleifer is a positive for the firm’s investment performance and culture, then he should reinstate Shleifer in his position as head of the private equity business.
