The denominator effect is where portfolio managers oftentimes have to move money from one assed class to another as each acid class relatively performs differently. shack veda and chris gates, the producer of the securities podcast, along with biota investor shack veda, talk about what we're seeing in venture capital right now.
Recently in the Lux Capital office, my colleague Chris Gates, the producer of the "Securities” podcast, along with biotech investor Shaq Vayda were talking about the global macro environment and venture capital. Tech stocks hit their zenith in November 2021, and now a lot of VCs have slowed down their investments over the last couple of months. That's led to something among limited partners and asset allocators known as the “denominator effect”, where portfolio managers move money from one asset class to another as each asset class performs relatively differently.
And so they talked about the denominator effect, they talked about a couple of other different patterns that they’re seeing in the venture world, and I figured that since it's summer, and it's July and we’ve already have talked about enough terrible news on the “Securities” podcast the last couple of weeks, I figured we could do something a little bit different, which is sort of a Venture 101 on the denominator effect, and talking about basically what we're seeing in the world today. So here's Shaq and Chris, take a listen.
Suggested reading:
WTF is the denominator effect? by Danny Crichton