The Yale effect for Venture Capital
“Investing in Venture Capital is a kind of roulette. Looking for the needle in the haystack. A game of pure chance.”
Those arguments will no longer count if you become more closely involved in Venture Capital.
Why is the top-performing endowment fund among all American universities investing approx. 17% of its assets in Venture Capital at the moment?
Very simple: for 20 years above-average returns can be generated.
Yale’s performance is 106% p.a., the time-weight performance is 25,5% p.a.
“The Warren Buffet of universities”, David Swensen — is investing in Venture Capital funds only to obtain a broader diversification (1).
In order to achieve these results managers are selected according to strict investment criteria. Costs are not playing any decisive factor, so Swensen, because “excellent managers cost money”. Rather the investment team and the investment strategy are the source of success.
Therefore the current press release is not surprising that Yale invests 400 million USD in Blockchain/Crypto Funds of VC firms Andreessen Horowitz and Paradigm (2).
So far Swensen shows off with entrepreneurial vision, power of imagination and a healthy portion of “swimming against the tide”. In 5 years the 400 million USD shall be ahead of their time and causing only head-shaking or once again confirming David Swensen’s investment instinct — when 400 million will make 4 billion USD.
Above all the high allocation quote of 17% in the illiquid Venture Capital market remains remarkable. An institution which is responsible for the university’s expenses, does not necessarily invest in stocks and bonds.
The current technical environment, the industrial revolution 4.0, is offering incredible investment chances according to Yale’s assessment. 10 years of smart-phone development might be in retrospect only a little taste of the technological change expected in the next 5 years.
No other conclusion can be made of David Swensen’s Endowment Fund investment behavior.
The motto — The biggest risk is not to be invested in Venture Capital — might become even more important with Yale’s latest press release:
“ Venture Capital is the place to be for the next big wave.”
If you like to ride this technological wave to its maximum our Fund of Funds will be the perfect solution.
Thanks to a broad diversification, a focus on 3 key-topics at a minimum of administrative costs and efforts, the MK Venture Best Selection fund is providing the perfect entry to the professional Venture Capital world.
