3 ms·
I don't think Fred's investors want to be sinking money in renewable energy. If you look at the returns to that asset class, they've been pretty bad. It's grea
by jakarta 14y ago
I don't think Fred's investors want to be sinking money in renewable energy. If you look at the returns to that asset class, they've been pretty bad.
It's great to do big things and change the world, but the pension funds backing Fred want to earn a good return.
- antr 14y ago"returns to that asset class, they've been pretty bad." Renewable energy assets have a pretty good IRR, in the mid-teens to low 20% - and even higher if you look at the 1995-2004 vintage. To any LP that is an above average return, in fact, it is above any equity return threshold for asset manager incentives/carry. Where did you get the data for you to say that "they've been pretty bad"?
- lifeisstillgood 14y agoI always return to this bet with John Kay: http://books.google.co.uk/books?id=6BLqprHdwygC&lpg=PA151&ots=E7_TYv35xm&dq=undercover%20economist%20returns%20investment%20railways%20USA&pg=PA151#v=onepage&q=undercover%20economist%20returns%20investment%20railways%20USA&f=false http://books.google.co.uk/books?id=6BLqprHdwygC&lpg=PA15... returns for the most successful railroad companies were mere 5% - competition kept things down (although speculation in early years lead to phenomenal returns - if sold) However, a moderate VC return is 3fold over ten years - which is ~12.5% YoY (unless my maths is bad). But then that is 12.5% of millions and millions not just one company.
- antr 14y agoI struggle to understand your point - I'd love to here a bit more to understand it. The IRR numbers I mention refer to UFCF/equity, i.e. no exit (hence return) via company/asset sale.
- lifeisstillgood 14y agoThat the return (assuming no sale at top of a bubble) for the best companies in the biggest industry of 19C was only 5%-10%. (Based on equity, it seems Harford did not calculate dividend return which may make a difference) Making 15-20% without an exit is a great deal - supporting I think your point.
- antr 14y agoIndeed, I agree. I'd be curious to know how common was the use of debt during that period. 5%-10% is a good return on an unlevered asset, debt could provide an additional turn - then, I don't know how the Kd and CPI was during that period.
- lifeisstillgood 14y agoDuring the 19th Century, U.S. railroads relied primarily on debt issues to finance their growth. This policy contributed to major financial crises (www.biu.ac.il/soc/ec/wp/16-01/16-01.pdf) Is that what you mean - or derivatives?
- antr 14y agojust wanted to know - now it's clear
- dasil003 14y agoI wonder what the returns on social media and fiddly web apps will be looking back 10 years from now.