Hedge fund Wellington Management, which is behind two of the hottest and most controversial real estate brokerage startups — Compass and Redfin — is reportedly suffering from an overly aggressive tech investment strategy, according to a news report.
Hedge fund Wellington Management, which is the money behind two of the hottest and most controversial real estate brokerage startups — Compass and Redfin — is reportedly suffering from an overly aggressive tech investment strategy, according to a news report. DocuSign also received a major investment from Wellington.
Boston-based Wellington is a high-powered investment management company with clients in more than 65 countries and nearly $1 trillion under management. Some of its sizeable tech investments have been written down, but not necessarily anything from its real estate related portfolio.
Over the last year, high-flying tech valuations have been brought down to earth. But real estate seems immune, publicly-traded Zillow is up more than 60 percent in the last year and private transactions like the sale of Commissions, Inc. show no softening in real estate tech valuatioins.
Wellington has placed some big tech bets, like Uber and Airbnb, some of which have fallen in value and hurt its balance sheet, according to a report in the Wall Street Journal this week.
While the WSJ report did not mention write downs for Compass, Redfin or Docusign, Wellington made significant investments in all three companies.
Compass, a New York-based high-tech real estate brokerage, raised $75 million last August with Wellington leading the round. The company has now raised a total of $210 million.
In late 2014, tech brokerage Redfin raised $70.9 million, led by Wellington. The company has raised a total of $164 million.
The firm was also a big investor in a 2015 DocuSign funding round when the digital transaction platform raised a whopping $233 million
The WSJ story focused on several companies in Wellington’s 72 tech investments with no mention of Redfin, Compass or Docusign. A list of Wellington’s tech investments can be found here.
“By the beginning of this year, the [tech] portfolio at Wellington had shrunk to about $6 billion, down roughly 40 percent from its peak in 2014, reflecting both investor withdrawals and investment declines, according to people familiar with the firm’s finances,” the WSJ report noted.
Inman could not determine whether any of its real estate investments had been written down.
However, Redfin CEO Glenn Kelman said, “Redfin has only been marked up so far as I know.”
Compass CEO Robert Reffkin said, “I don’t know [what Wellington has done], but having only invested seven months ago I doubt they have done anything.”
DocuSign is expected to announce a public offering sometime this year or next and is said to have an impressive profit and loss statement along with a strong balance sheet. Observers say its value has risen, not declined.
There has been speculation about the value of Compass and Redfin — estimated as high as $1 billion for each firm — but neither company has disclosed its valuation numbers.
Wellington is private so there is very little public information on the performance of their investments. The Wall Street Journal got its hands on private financial documents.
Wellington likes making big investments in late-stage startups and helping them successfully go public. That reputation was why Compass, Redfin and DocSsign were all eager to nab their funding.
Wellington has also done its shares of fintech investments including investing in both SoFi’s $213 million round in 2013 and its $1 billion round in 2015.
In the end, Wellington’s real estate investments may someday help it cover for other losses.