Proper asset allocation is crucial for achieving long-term steady-state returns, with emphasis on diversifying investments across different asset classes.
Utilizing cold outreach and network mapping, Virtus Investment Management identified and connected with potential fund managers, leveraging platforms like the SEC website, social media, and industry databases to meet their early-stage investment mandate.
Consistent investment strategies are key to long-term success in venture capital, with evaluation criteria including portfolio networks, deployment strategies, and commitment to investment approach.
Deep dives
Focusing on diverse asset classes for long-term steady returns
Virtus Investment Management prioritizes asset allocation and the proper mix of asset classes to achieve long-term steady state returns. They emphasize the importance of diversifying investments across public markets, buyouts, and real estate to ensure consistent cash flow durations and meet the investing mandate of their clients.
Cold outreach and network mapping for finding fund managers
Virtus Investment Management utilized cold outreach and network mapping to identify and connect with potential fund managers. They initially faced challenges as a newly established single family office from Philadelphia. However, they leveraged platforms like the SEC website, social media, and industry databases to identify and reach out to managers fitting their early-stage investment mandate. They also sought introductions from fund of funds and built relationships with key players in the venture capital ecosystem.
Importance of consistency in investment approach and considerations for fund re-ups
Virtus Investment Management emphasizes the significance of consistent investment strategies for long-term success in venture capital. They evaluate managers based on their portfolio networks, deployment strategies, and commitment to their investment approach. They prioritize managers who align with their diversified investment approach and avoid those who deviate or change their strategies significantly. The team believes in maintaining consistency in investments to capture outlier returns, avoid risks, and ensure steady portfolio performance.
Importance of Proper Asset Allocation
Proper asset allocation is crucial for achieving long-term steady-state returns. The speaker emphasizes that 90% of overall returns come from asset allocation rather than individual investments. By diversifying across different asset classes like public markets, buyouts, and real estate, investors can optimize their portfolios for long-term growth. The compounding benefits associated with early-stage venture capital highlight the importance of keeping investments in this asset class for a longer duration, as they can yield significant returns over time.
The Role of Humility and Reporting in Gaining LP Trust
In order to win over LPs, two key factors stand out. Firstly, the ability of fund managers to hold their opinions loosely and adjust their investment strategies based on feedback and data analysis. The willingness to prioritize the operational aspect of the business, such as timely reporting, is also crucial. LPs appreciate managers who prioritize non-investment components and demonstrate a commitment to building a reputable brand. Building trust through humility and attentiveness to LP concerns can greatly influence investment decisions.
Jamie Rhode is Principal at Verdis Investment Management, focused on venture capital, private equity and hedge fund investment sourcing and due diligence.
She joined Verdis from Bloomberg, where she held roles in both equity research and credit analysis. There, she created, managed and leveraged an extensive library of statutory and financial and market data for buy and sell-side clients that use Bloomberg to make investment decisions.
A licensed Chartered Financial Analyst, she earned her bachelor’s degree in Finance and Marketing from Drexel University’s College of Business Administration.
You can find Jamie on her socials here:
Twitter: https://twitter.com/DurationFX
LinkedIn: https://www.linkedin.com/in/jerrcfa/
And huge thanks to this episode's sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters
OUTLINE:
[00:00] Intro
[04:27] What skills did Jamie acquire while working at Bloomberg
[08:45] What inspired Jamie to go into equity research
[11:55] Verdis' original allocation model
[13:27] How Verdis first built their deal flow in 2016
[15:26] What Jamie likes in a cold email
[16:41] What kind of cold email to VCs won Verdis an 80% response rate?
[20:27] Verdis' inbound vs outbound deal flow over the years
[22:34] Why Verdis' mandate is to invest in diversified portfolios as opposed to concentrated portfolios
[27:50] The downsides of early distributions
[32:12] The benefits of early distributions
[36:01] Luck versus skill
[40:15] Why does Verdis measure "outliers" as opposed to unicorns
[44:37] The relationship between proprietary deal flow and portfolio allocation models
[45:55] How does Verdis decide which portfolio funds get re-ups
[48:52] Why GPs shouldn't conform their strategies to LPs' mandates
[51:08] Why LPs should also have consistent strategies
[53:28] Why Verdis invests a third of their fund in funds based in Los Angeles
[58:50] A case study on what happens when you skip a step in the due diligence process
[1:02:57] The two things a GP can do to win Jamie over
[1:05:32] When does Verdis like to receive their tax documents from GPs?
[1:08:46] Thank you to Alchemist Accelerator for sponsoring
[1:11:23] Legal disclaimer
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