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You have to consider the risk/illiquidity that's taken on to achieve that return. It's my understanding that VC works in a manner similar to PE, where investor
by jakarta 14y ago
You have to consider the risk/illiquidity that's taken on to achieve that return.
It's my understanding that VC works in a manner similar to PE, where investors are given their returns when the entire fund they invest in is run down. Each fund has a vintage, so if you invest in the 2006 fund you might get paid back 7 years from then in 2013, that's kind of a long time.
For a liquid asset class to compare to, equities have done something like 6-6.5% real historically.
- _delirium 14y agoYeah, that makes sense. I wasn't meaning to imply skepticism, just that I don't recall having actually seen a go/no-go number explicitly spelled out elsewhere, that 12% p.a. is the rough threshold delineating whether VC is worth it as an asset class, taking into account the risk/liquidity/etc. I suppose going forward it mainly depends on what you think will happen to the stock market. Will the next 20 years see the resumption of the WW2-through-1990s performance level, or will they look more like the past 20 years, with middling to flat returns? If the latter, VC might become attractive at even lower returns compared to anemic returns in "regular" equity, but if the former, then it may become less attractive compared to a more liquid and diversified stock portfolio.