(Bloomberg) -- Macquarie Capital is writing down nearly its entire investment in Indian startup Byju’s, weeks after Swiss bank Julius Baer Group Ltd. accused it of charging fees based on an outsized and outdated valuation, according to people familiar with the matter.

The unit of Australia’s Macquarie Group Ltd. is cutting the value of its stake in the beleaguered education provider by about 98%, the people said, asking not to be identified because the matter is private. Macquarie Capital invested a few hundred millions of dollars in Byju’s in 2021, said the people.

The move comes after Julius Baer Chief Investment Officer Yves Bonzon sent a letter to Macquarie Capital in January, saying the firm was too slow to revalue the stake and provide information. Bonzon said Macquarie Capital continued to charge clients based on a 2022 funding round that valued Byju’s at $22 billion, even after other investors marked down their valuations by as much as 95%, according to the letter seen by Bloomberg.

Julius Baer’s clients invested via a feeder fund into a Macquarie vehicle that held the Byju’s stake. 

Julius Baer declined to comment. A Macquarie spokesperson said the information was “incomplete and not up to date,” without elaborating.

Founded by entrepreneur Byju Raveendran, Byju’s was once India’s most valuable tech startup. Its market value has since plummeted in the books of many other investors. But Macquarie Capital continued to calculate management fees based on a net asset value that no longer intrinsically represented what Byju’s is worth, Bonzon wrote. 

“We believe this demonstrates a disincentive for Macquarie to devalue the position, despite the strong market indications that the March 2022 valuation no longer holds, in contravention of your fiduciary duties as a fund manager,” Bonzon wrote in the letter dated Jan. 22, which two of the people said was delivered both electronically and in person. 

The issue highlights the risk of private market valuations, which lack the speedy repricing of publicly listed stocks. While that has helped many institutional investors maintain the paper value of their portfolios, it can also disguise poor performance.

Julius Baer marked down its own valuation of the feeder fund by 80% in December “as we found it challenging to justify the position held by Macquarie Capital,” Bonzon wrote. 

“We have repeatedly sought clarification on these matters, yet the responses thus far have not provided the clarity or resolution we expect,” the CIO said in the letter. “This issue is of significant importance, not only due to the size of the investment but also because it reflects on the integrity of our partnership.”

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