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> Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that. The VCs are gambling with

> Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that. The VCs are gambling with someone else's money though. They raise money from institutional investors: pension funds and insurance companies. Ultimately the little guy will pay via government bailouts, pension reductions, and higher insurance premiums.

Ericson2314 8y ago
I get they raise others' money, but which pension funds are being into this high risk stuff?
- maxxxxx 8y ago
  Quite a few. Due to underfunding they are under a lot of pressure to produce higher returns so they invest into VC and private equity.
- bspn 8y ago
  Almost all of them. They manage their portfolios like most other large fund managers albeit with a slight preference towards lower risk assets to ensure their short/medium term pension obligations are met, but they will almost always have an alternative investment bucket which VC will be a part of. They're also not interested in doing direct investments, so they'll diversify their early stage risk by investing in a couple of the more successful, established VC funds who spread the bets for them.
- notfromhere 8y ago
  lots of them allocate a percentage to alternatives, and with a low-return environment, there was a push to keep doing it. However, there's also been a counter movement of pensions moving cash out of alternatives due to mediocre performance after fees are accounted for. It's a mixed bag really, a lot of it has to do with pensions sometimes being run by untrained elected officials, or them buying whatever bs a pe or hedge fund shop is selling them.
HillaryBriss 8y ago
IMO, pension governance would be a better place to reform policy, as opposed to at the central bank level. I mean, should economy-wide monetary policy be changed just because of the arguably foolish behavior of some VC funds in SV?

Ericson2314 8y ago

I get they raise others' money, but which pension funds are being into this high risk stuff?

maxxxxx 8y ago
Quite a few. Due to underfunding they are under a lot of pressure to produce higher returns so they invest into VC and private equity.
bspn 8y ago
Almost all of them. They manage their portfolios like most other large fund managers albeit with a slight preference towards lower risk assets to ensure their short/medium term pension obligations are met, but they will almost always have an alternative investment bucket which VC will be a part of. They're also not interested in doing direct investments, so they'll diversify their early stage risk by investing in a couple of the more successful, established VC funds who spread the bets for them.
notfromhere 8y ago
lots of them allocate a percentage to alternatives, and with a low-return environment, there was a push to keep doing it. However, there's also been a counter movement of pensions moving cash out of alternatives due to mediocre performance after fees are accounted for. It's a mixed bag really, a lot of it has to do with pensions sometimes being run by untrained elected officials, or them buying whatever bs a pe or hedge fund shop is selling them.

HillaryBriss 8y ago

IMO, pension governance would be a better place to reform policy, as opposed to at the central bank level. I mean, should economy-wide monetary policy be changed just because of the arguably foolish behavior of some VC funds in SV?