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10 tweets,
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1/ A big portion of the largest public asset managers (think long-only funds, hedge funds, etc) are actively exploring ways to go deeper into private equity/vc. This article from @WSJ covers some of the reasons the dynamic is happening:
wsj.com/articles/index…
wsj.com/articles/index…
2/ Rising competition in publics, companies going public later, less information edge, declining fees, etc. At same time LPs are saying “give us something new/unique”.
3/ Some predictions: First, there will be some surprises for the public asset managers as they lean into privates. Duration of investment (and resulting feedback loop) and a lack of data-driven decision making (particularly in VC) are two obvious ones.
4/ Everyone thinks grass is always greener. “Privates have less volatility” some say (that’s insane-> it has more, it just isn’t marked as frequently). Also - public managers are in for a rude awakening on a few other key points.
5/ Scalability- discretionary private strategies are not scalable. Yes, historically GPs raise larger funds but the result is scope creep and declining funds.
6/ Private fundraising rounds have much more limited capacity and the process to discover the next deal is opaque, unrepeatable and unpredictable.
[An exception would be systematic private investing]
[An exception would be systematic private investing]
7/ Key Person Risk- Many, not all, public asset managers are going to run into a culture clash when they deal with star VC/PE investors that are used to less oversight, less transparency and often much higher fee %.
8/ Math and science tend to win in every industry over time. In investing most public investors (discretionary or systematic) use about 10x as much data as privates.
9/ Would love to be in the room for this dialogue: "Got it so you made 30 investments, 29 didn't work and 1 was @lyft. How will you find the next Lyft?"
10/ Public asset managers are going to keep pushing to get into privates either as LPs or directly investing (by starting their own PE/VC or acquiring existing platforms).
What else am I missing about this movement?
What else am I missing about this movement?
