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Trevor Loy Profile picture
Trevor Loy
@trevorloy
VC investor @FlywheelVC. Lecturer, eship mgmt finance & VC @Stanford. Expert witness. Past: BoD @NVCA; Mentor @KauffmanFellows; 3x fndr; Chip design @Intel.
Apr 5, 2022 • 110 tweets • 18 min read
Here's a thread explaining background context of newly proposed @SECGov regs for VCs, for those who may not be familiar (or weren't in VC industry when current regs were created). Disclaimer: I'm no expert on precise details of any particular element/event I will describe.

1/ 2/ Prior to 2008 GFC, SEC focused mostly on "traditional" investment advisers we all think about: investment banks, mutual funds, private wealth advisers, etc.

A key driver of 2008 GFC, though, was the enormous increase in what was called the "shadow banking" system.
Apr 5, 2022 • 16 tweets • 4 min read
Just posted 6-tweet thread abt new proposed @SECGov rules affecting VCs (both ERAs + RIAs).

Last wk in VCJ, @laragon did a nice interview abt this w/ fmr 11-yr head of SEC's Private Funds Unit (may require trial signup):
venturecapitaljournal.com/friday-letter-…

A few key pts from that article: 2/ First, esp. imp for ERAs to pay attn b/c many ERAs (wrongly!) assume that exempt from reg = exempt from oversight, inspection, or enforcement.

A subset of proposed rules apply equally to ERAs + RIAs.

In addn, some of these will override even terms in a specific fund LPA.
Apr 5, 2022 • 6 tweets • 2 min read
🧵ICYMI, @SECGov recently issued significant proposed new regs to cover US VC firms. Many cover only RIAs but some also cover ERAs (which is most VC's).

The 342 pg SEC doc to review: (link to PDF):
sec.gov/rules/proposed…

Here's a quick thread w/ a few summary takeaways:

1/ 2/ For RIAs only:

* increased transparency in reporting calculations for performance, fees, & expenses.

* mandatory audit of all funds

* independent fairness opinion for GP-led secondaries

* changes to Advisers Act compliance rule re: how SEC may conduct examinations
Mar 11, 2022 • 17 tweets • 3 min read
Quick explanation of the “denominator effect:” most institutional investors have a target % allocation to each asset class. Their actual exposure to those asset classes =

($ current value of assets held in an asset class)

divided by

($ current value of total portfolio)

1/n If the value of the denominator falls faster than the value of the numerator, current actual % held in an asset class goes *UP*.

This may cause the % allocation to, say, VC to exceed the target % — not b/c value of VC assets fell, but b/c the value of other assets fell.

2/n