LP to VC’s: Please Go Out of Business!

May 1, 2009

Adding fuel to Fred Wilson’s recent point concerning Venture Capital’s math problem and there being too much money going into the asset class, at the NVCA’s convention this week Rebecca Connolly, of Fairview Capital (a Fund-of-funds with $3 billion under management and 70% of that being allocated to Venture Capital) gave a talk were she said:

I hope some of you go out of business. I hope that does happen. Let’s just flush everything out and get back to less competition, less money…just not my funds.

To be fair though, while LPs are enjoying their moment in the sun of talking tough and “leveling the playing field”, they’re the ones who gave the underperforming funds money to begin with. There’s plenty of blame to go around. Ultimately if the LPs do their job right, the “bad” firms will fade away as the meritocratic elements of the industry won’t enable those in the lower rungs to raise more funds. 


Videos From the Milken Institute Global Conference

April 29, 2009

From the always readable InfectiousGreed, here’s a video of Vinod Khosla being interviewed by Elizabeth Corcoran on the topic of the shift to renewable energy.

Next up is a video featuring a panel of feisty institutional investors (yup, feisty LPs!).  Worth watching.

Both discussions took place at this year’s Milken Institute Global Conference.

Changes in CalPERS’ Private Equity Fund Holdings

November 18, 2008

Here’s an interesting article from over at PEHub concerning the changes in CalPERS’ private equity fund holdings between the end of year 2007 and end of the first half of 2008. Dan Primack noted that there were 96 funds listed in the prior report that didn’t make the new list. To all of us keeping score at home, this means that CalPERS divested over 25% of its private equity fund investments between the end of 2007 and the end of Q2 2008 (Dan notes that this does not include 2008-vintage funds or the California Emerging Ventures portfolios). The vast majority of these disposed of investments ended up as part of a record breaking year for secondaries.

PEHub put together a handy little spreadsheet comparing CalPERS’ private equity fund holdings between the end of 2007 report and the end of Q2 2008 report. They’ve indicated funds from the old report in red, while funds from the new report are in black. If you see a red one without a corresponding black one, that means it’s no longer a CalPERS holding:

Private Equity Secondaries Market Set to Break Record

August 11, 2008

As LPs look to sell-off certain interests in private equity funds as tougher times force them to rethink strategy, the sales of limited partnerships in private equity funds is expected to grow by 20% to a record $18bn this year, according to NYPPEX. This is in line with the overall growth being experienced by the secondaries as a whole. The secondaries market typically fairs better in difficult times and now is no exception. Many institutional investors are looking for some immediate returns to their portfolio investments in light of current market conditions.

Also, 84% of institutional investors are worried that GP strategy “drift” will effect their returns. The irony cannot be lost that often drift is a result from LPs increasing appetite for PE as an asset class. All the money LPs have given PE firms has to go somewhere.

Stating the Obvious: European LPs Interested in Diversifying into Emerging Markets

August 6, 2008

European private equity advisory firm Epiven has released a report stating that 88% of the LPs they surveyed in Europe expect to increase their allocations towards China within the next five years. But does this really tell us anything? Most LPs will say that they don’t wish to have all their eggs in the same proverbial basket, so why wouldn’t someone surveyed say they want to branch out from their current investment base into a growing market?

On the subject of China, Guy Fraser-Sampson wrote an interesting article for Real Deals on why he feels that buyout firms looking at, and investing in China now will be let down much like PE firms were in the early 1990’s and that the country is about 10 years away from being truly attractive for private equity. Worth reading!