The "Yale Asset Allocation Model" has led a lot of pension/endowment/foundations to invest into venture capital. More $s into the venture capital asset class have allowed companies to stay private for longer (...why go public if you can access as much capital as you need when private). Private for longer means less distributions (less liquidity) for pension/endowment/foundations. Hence the rise in the private pre-IPO stock market (secondary market trading). Sell in the secondary and realize returns and raise cash. My opinion, this is a natural market evolution of a growing asset class. VC isn't broken, its growing and there will be natural growing pains as the asset class grows and more (and different types) investors participate. Embrace the change. If you're a pension/endowment/foundation and need cash sell your LP positions in the secondary. If your a VC and your LPs want liquidity, sell some of your positions in the secondary (e.g. be a portfolio manager!). If your a VC-backed company and electing to not IPO, offer structured tender offerings (e.g. every 6 months, every 12 months) so your investors can get liquidity/invest more and new investors can invest, now that your company has a "safer" risk/adjusted return profile. Liquidity challenges lead to market participants developing financial solutions ... capitalism at its finest. Peter Walker Clint Sorenson CFA, CMT Nick Fusco Michael Jackson
“Venture distribution cycles have elongated to the point that LPs now risk a decade of negative cash-flow on many of their VC relationships. That's not sustainable for institutions with large spend requirements, such as a university endowment.” A lack of liquidity in VC is proving to be a major issue for some endowments. There are plenty of medium sized endowments who went full in on the Yale model, but have a lot more concentration risk due to size. That’s a tough game to play when you have required outflows. https://lnkd.in/ewkhEDSi
