VC overcrowding means AUM must fall for returns to recover: Expert
| Nov 2nd, 2009 | Filed under: Academic Research, Institutional Investing, Today's Post | By: Guest |
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By: Konstantin Danilov, AllAboutAlpha.com Editorial Board.
In his recently released paper, Paul Kedrosky of the Kauffman Foundation discusses current state of the U.S. venture capital industry and ponders whether its burgeoning size is limiting investors’ returns from the asset class. LPs have continued to allocate increasing amounts of capital to VC funds, despite the precipitous decline in performance over the past five years: the 10 year returns for the industry, as calculated for the author, are barely ahead of the Russell 2000 Index, and will turn negative in 2010 as dotcom bubble returns are excluded. The lackluster performance is a fairly recent phenomenon – the string of low to negative returns began in 2004 – which Kedrosky attributes to three potential causes.
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