(Bloomberg) -- Atreides Management LP, a $3 billion hedge fund led by Gavin Baker, is seeking to raise a vehicle dedicated to opportunistic venture wagers amid a challenging period for startups.

“It is easy to say ‘Be fearful when others are greedy and greedy when others are fearful,’ but much harder to do in practice,” Baker, 46, told clients in a letter seen by Bloomberg. “The next 9 to 12 months will be one of the best times in history to be greedy and deploy capital within venture.” 

Atreides plans to launch the fund, which will have flexibility to invest in structured equity rounds and take public companies private, in coming weeks. Rivals including Coatue Management and Viking Global Investors already have begun raising vehicles dedicated to convertible or structured equity wagers. 

The firm’s crossover strategy lost 5.5% in June, extending its first-half loss to 11.5%, net of fees. It has returned 66.7% since its 2019 inception. 

“We are beginning to see exceptional opportunities in private markets as down rounds and recapitalizations become increasingly common, especially for those companies who raised at absurd valuations in 2021, spent aggressively in anticipation of raising money at an even higher valuation, have a relatively short cash runway and now must raise money at terms that are highly advantageous to buyers,” Baker said in the July 8 letter. 

Take-private opportunities may exist for recently listed companies whose cash balances comprise substantial portions of their market value, and Atreides will seek to partner with a private equity or growth-equity fund to facilitate any transaction, he wrote. 

An Atreides representative declined to comment.

Venture Portfolio

Atreides manages a crossover strategy that involves making bets on both public and private companies. In June, the Boston-based firm marked down 28% of its venture portfolio by an average of 32% following a third-party review, Baker wrote in the letter, without providing specifics. The firm relied upon recent marks for 42% of its venture portfolio, which includes Elon Musk’s SpaceX, its largest position, and Epic Games.

“Any up round in the last several months is a very real mark given how troubled private markets are right now,” Baker wrote. 

About one-fifth of its venture portfolio has raised convertible securities this year, Atreides said, citing fast-delivery startup GoPuff as an example. 

Atreides has minimal exposure to high-flying software, cryptocurrency and fintech startups, sectors where it predicts the largest markdowns and down rounds will occur.

To be sure, Baker cautioned that it’s unclear whether recent markdowns will result in permanent losses of capital, noting that both Facebook parent Meta Platforms Inc. and Tesla Inc. raised down rounds during the financial crisis but have since soared in value.  

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