This seems like a massive ‘hit or miss’ game, close to gambling. Calculated, of course. But the variances and extremes of wins and losses are extraordinary! Who bails out the VCs that constantly deploy capital to frogs or start-ups that go bust? Seems like VC firms themselves are a massive binary option.
PE venture returns have been shown to be persistent by firm right? So how do investors assure they get into the best funds? Also, from a multi-asset portfolio perspective should one try to 'time' their vintage year?
Persistency by firm - that's traditionally correct. Nevertheless, this correlation has started to fall apart. (slowly) It is a trend to be observed. But your question is spot on: getting into the Top quartile funds is really the skill. And it is hard (if not impossible) - several top tier funds are closed for new investors. And new funds still have to earn their stripes.
Thank you so much Prof. Claudia!
Glad it was helpful!
This seems like a massive ‘hit or miss’ game, close to gambling. Calculated, of course. But the variances and extremes of wins and losses are extraordinary! Who bails out the VCs that constantly deploy capital to frogs or start-ups that go bust? Seems like VC firms themselves are a massive binary option.
More in class today; but indeed it is a bet on outliers. The very far end of the distribution.
Thank you so much Prof Claudia!! This is very enlightening
Glad it was helpful!
PE venture returns have been shown to be persistent by firm right? So how do investors assure they get into the best funds? Also, from a multi-asset portfolio perspective should one try to 'time' their vintage year?
Persistency by firm - that's traditionally correct. Nevertheless, this correlation has started to fall apart. (slowly) It is a trend to be observed. But your question is spot on: getting into the Top quartile funds is really the skill. And it is hard (if not impossible) - several top tier funds are closed for new investors. And new funds still have to earn their stripes.
Great
thanks