4 ms·

This is basically saying, "Let's package together a bunch of volatile high-risk, high-return investments in a completely unregulated market and sell that to peo

This is basically saying, "Let's package together a bunch of volatile high-risk, high-return investments in a completely unregulated market and sell that to people". Seems like Silicon Valley financiers are beginning to think like Wall Streeters.

m52go 13y ago
Guess where the last fund called Maiden Lane came from: http://en.wikipedia.org/wiki/Maiden_Lane_Transactions http://en.wikipedia.org/wiki/Maiden_Lane_Transactions
- deleted 13y ago
  [deleted]
- mikenyc 13y ago
  It seems like you're trying to imply some kind of negative connection to this fund based on a similar name. What's your point? It's like saying one guy named Joe did something you don't like, so it's interesting that this other guy is named Joe too. Who cares?
  - m52go 13y ago
    You seem bitter about something, either as if you were involved with the first Maiden Lane and missed your bonus that year or as if you have vested interests in seeing this new Maiden Lane succeed. I meant what I said. Why are you reading so much into it?
    - mikenyc 13y ago
      Nope. I just thought it was a pointless comment. That's all.
ig1 13y ago
This isn't Joe Random they're selling to, they're selling to institutional investors who are sophisticated buyers. There are plenty of people who fully understand the risks involved who want to engage in high-risk high-return investment (especially ones where the risk profile is significantly different from their other investments to provide hedging). There are risks with this model (for example there may be less due diligence then you traditionally get with VCs) but the overall risk model probably isn't hugely different from a seed stage fund.
- primitivesuave 13y ago
  Right, I was referring to the claim that some day you can invest money in angel investors through a stock exchange.
- rayshan 13y ago
  Institutional investors who could be pension funds or middlemen who repackage this new class of asset to sell to individuals for convenience. Not writing off the utility of such an instrument but multiple levels of complexity could be dangerous.
- IBM 13y ago
  Joe Random wasn't buying Wall Street's CDOs either.
tpeng 13y ago
While your description certainly can conjure some bad memories, risk pooling per se is a utility-creating activity, and only breaks down when correlations are not estimated correctly. Unregulated markets also aren't necessarily a bad thing, but they do require greater sophistication and caution on the part of investors, due to the greater probability of fraud and promotion. It's important that the angels are sufficiently aligned by having skin in the game and that the method of calculating the carry does not somehow create a principal-agent problem. I am not familiar enough with the product to know if that is the case.
- m52go 13y ago
  Correlations can never always be estimated correctly. They'll work for a while, but as soon as the underlying assets stop acting according to the 'rules' upon which the original correlations were calculated, disaster strikes. That turning point always occurs--it's not a matter of 'if' but 'when' and 'how severe'.
fludlight 13y ago
> Seems like Silicon Valley financiers have always thought like Wall Streeters. FTFY ;-) BTW, in finance terminology this is called a fund of funds (FoF). Fees on top of fees. Warren Buffett has been warning against these types of structures for years, but both professional and individual investors have always had an appetite for them since they are the closest thing to a privately held ETF. Speaking of ETFs, here's a quote from the man behind the company from the article: > “Some day you’re going to sit at your Schwab account or your Fidelity account and you’re going to say, ‘I’d like to take 1% of my net worth and put it into angel deals,’” Schwab and Fidelity target upper middle class individuals, who loooove ETFs (or should love them, since, as a group, they are not very good investors). Also this fund might charge a 30% carry, but at least there is no management fee. Footnote: I know that there are exceptions to every rule. So please no N=1 anecdotal replies.
- naval 13y ago
  There are no double fees on this fund. The 30% is used to pay the angels their carry, out of that 30%. Whatever's left goes to the GPs. Warren's criticism does not apply here. The rest is correct :-)
7Figures2Commas 13y ago
> This is basically saying, "Let's package together a bunch of volatile high-risk, high-return investments in a completely unregulated market and sell that to people". 1. Your "unregulated market" claim is baseless. This fund, which is no different than any other venture capital fund, has registered with the SEC in accordance with Regulation D. You can find the filing on the SEC website. 2. Angel investing is not exactly "high-return" these days. See http://gust.com/blog/2012/03/27/the-reality-of-returns-on-angel-investment/ http://gust.com/blog/2012/03/27/the-reality-of-returns-on-an... and http://rightsidecapital.com/assets/documents/HistoricalAngelReturn.pdf http://rightsidecapital.com/assets/documents/HistoricalAngel... for some data points. For reference, the S&P 500 gained nearly 30% last year. 3. In regards to your overall concern that people are being sold "volatile high-risk, high-return investments", consider that there are variety of leveraged products, including triple-leveraged ETFs and double-leveraged ETNs yielding 15-20% annually, that retail investors can purchase on major stock exchanges. Notwithstanding the fact there's nothing inherently wrong with "volatile high-risk, high-return investments" and there is a place for them in many portfolios, picking on a tiny pseudo-fund of funds targeting accredited investors is not the most effective way to make your argument. 4. As for "Silicon Valley financiers are beginning to think like Wall Streeters", the notion that Silicon Valley venture capital has somehow existed in isolation until now is simply not accurate. That said, my personal take is that this fund, when compared to some of the exotic financial instruments developed/popularized by "Wall Street" in recent years, is more novelty than anything else. I wouldn't even call it innovative, let alone exotic.

m52go 13y ago

Guess where the last fund called Maiden Lane came from: http://en.wikipedia.org/wiki/Maiden_Lane_Transactions http://en.wikipedia.org/wiki/Maiden_Lane_Transactions

deleted 13y ago
[deleted]
mikenyc 13y ago
It seems like you're trying to imply some kind of negative connection to this fund based on a similar name. What's your point? It's like saying one guy named Joe did something you don't like, so it's interesting that this other guy is named Joe too. Who cares?
- m52go 13y ago
  You seem bitter about something, either as if you were involved with the first Maiden Lane and missed your bonus that year or as if you have vested interests in seeing this new Maiden Lane succeed. I meant what I said. Why are you reading so much into it?
  - mikenyc 13y ago
    Nope. I just thought it was a pointless comment. That's all.

ig1 13y ago

This isn't Joe Random they're selling to, they're selling to institutional investors who are sophisticated buyers. There are plenty of people who fully understand the risks involved who want to engage in high-risk high-return investment (especially ones where the risk profile is significantly different from their other investments to provide hedging). There are risks with this model (for example there may be less due diligence then you traditionally get with VCs) but the overall risk model probably isn't hugely different from a seed stage fund.

primitivesuave 13y ago
Right, I was referring to the claim that some day you can invest money in angel investors through a stock exchange.
rayshan 13y ago
Institutional investors who could be pension funds or middlemen who repackage this new class of asset to sell to individuals for convenience. Not writing off the utility of such an instrument but multiple levels of complexity could be dangerous.
IBM 13y ago
Joe Random wasn't buying Wall Street's CDOs either.

tpeng 13y ago

While your description certainly can conjure some bad memories, risk pooling per se is a utility-creating activity, and only breaks down when correlations are not estimated correctly. Unregulated markets also aren't necessarily a bad thing, but they do require greater sophistication and caution on the part of investors, due to the greater probability of fraud and promotion. It's important that the angels are sufficiently aligned by having skin in the game and that the method of calculating the carry does not somehow create a principal-agent problem. I am not familiar enough with the product to know if that is the case.

m52go 13y ago
Correlations can never always be estimated correctly. They'll work for a while, but as soon as the underlying assets stop acting according to the 'rules' upon which the original correlations were calculated, disaster strikes. That turning point always occurs--it's not a matter of 'if' but 'when' and 'how severe'.

fludlight 13y ago

> Seems like Silicon Valley financiers have always thought like Wall Streeters. FTFY ;-) BTW, in finance terminology this is called a fund of funds (FoF). Fees on top of fees. Warren Buffett has been warning against these types of structures for years, but both professional and individual investors have always had an appetite for them since they are the closest thing to a privately held ETF. Speaking of ETFs, here's a quote from the man behind the company from the article: > “Some day you’re going to sit at your Schwab account or your Fidelity account and you’re going to say, ‘I’d like to take 1% of my net worth and put it into angel deals,’” Schwab and Fidelity target upper middle class individuals, who loooove ETFs (or should love them, since, as a group, they are not very good investors). Also this fund might charge a 30% carry, but at least there is no management fee. Footnote: I know that there are exceptions to every rule. So please no N=1 anecdotal replies.

naval 13y ago
There are no double fees on this fund. The 30% is used to pay the angels their carry, out of that 30%. Whatever's left goes to the GPs. Warren's criticism does not apply here. The rest is correct :-)

7Figures2Commas 13y ago

> This is basically saying, "Let's package together a bunch of volatile high-risk, high-return investments in a completely unregulated market and sell that to people". 1. Your "unregulated market" claim is baseless. This fund, which is no different than any other venture capital fund, has registered with the SEC in accordance with Regulation D. You can find the filing on the SEC website. 2. Angel investing is not exactly "high-return" these days. See http://gust.com/blog/2012/03/27/the-reality-of-returns-on-angel-investment/ http://gust.com/blog/2012/03/27/the-reality-of-returns-on-an... and http://rightsidecapital.com/assets/documents/HistoricalAngelReturn.pdf http://rightsidecapital.com/assets/documents/HistoricalAngel... for some data points. For reference, the S&P 500 gained nearly 30% last year. 3. In regards to your overall concern that people are being sold "volatile high-risk, high-return investments", consider that there are variety of leveraged products, including triple-leveraged ETFs and double-leveraged ETNs yielding 15-20% annually, that retail investors can purchase on major stock exchanges. Notwithstanding the fact there's nothing inherently wrong with "volatile high-risk, high-return investments" and there is a place for them in many portfolios, picking on a tiny pseudo-fund of funds targeting accredited investors is not the most effective way to make your argument. 4. As for "Silicon Valley financiers are beginning to think like Wall Streeters", the notion that Silicon Valley venture capital has somehow existed in isolation until now is simply not accurate. That said, my personal take is that this fund, when compared to some of the exotic financial instruments developed/popularized by "Wall Street" in recent years, is more novelty than anything else. I wouldn't even call it innovative, let alone exotic.