Exactly What Are the Different Buckets of Private Equity?

3min Snip

00:00

Play full episode

Summary

Transcript

Episode notes

Every sort of l p has their own strategy. Ad they're all trying to figure out exactly what is that right formula for them. Let's say you have one million dollars, and you want allocate one million dollars of capital. You might say, 90 % of that's getting go on the public markets,. Public markets tend to provide liquidity. That's just a fancy word for saying, you can buy and sell it on a daily basis. It provides sort of visibility into the metrics. Now let's re run the math. So you have a hundred thousand in venture in 800 thousand in pub equities. Right to night. Got it?

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.