Their investments helped boost inflows that year to $51 billion, a 14-year high, according to Thomson Reuters data. Since then mutual funds have dialed down their pre-IPO deals after several Silicon Valley companies missed growth targets, even though they took part in a $1.3 billion funding of messaging app Snapchat earlier this year and are buying shares from employees and founders to raise their stakes in companies.
Some funds count Uber, Pinterest and WeWork Companies Inc, among their largest holdings, filings show. For example, Uber is a top 15 holding in the $19 billion Fidelity Blue Chip Growth fund.
At T. Rowe Price, private investments made up about 4 percent of assets of its $16 billion New Horizons Fund at the end of 2015. The asset management firm's spokesman Bill Weeks said individual securities typically represented less than 1 percent of any fund's portfolio, but acknowledged such investments could still pack a punch.
"If, for example, you have 2 percent of a fund in private companies and those holdings go up 50 percent in a flat market, that would add 1 percent of relative performance. It works the same way on the way down."
Pre-IPO investments are assessed by mutual funds valuation committees which look at revenue growth, competition, barriers to entry and what others paid in subsequent funding rounds. Fund managers are excluded from the discussion, but like other employees stand to benefit from mark-ups because management fees tend to rise with the value of assets.
Glenn Booraem, treasurer for Vanguard funds, said outside auditors reviewed valuations of the funds' relatively small private investments.
"It's more art than science, but our objective every day is to strike a net asset value that represents the fair value of all the assets in the fund."
Fidelity said its process was "rigorous and thorough" but it declined to comment on individual valuations. Mutual funds must determine a value for their private investments every trading day so a portfolio's overall net asset value can be calculated.
Venture capital firms typically value tech holdings quarterly, but share those valuations only with their limited partners - institutional investors with a greater understanding of the risks involved.
"Who doesn't think Uber has a great thing going?" said David Kudla, CEO of Mainstay Capital Management, which has $2 billion under management. But many got caught off guard when valuations of firms such as Dropbox or Zenefits get slashed, he said. "There is a lot of risk in these pre IPO investments."