I have two thoughts on this:
- This is good news for the venture capital industry. The venture capital industry has been working through an over-supply of capital for the past 13 years that has brought down industry returns. In my opinion, when large investors such as CalPERS are backing away from the industry, this is the perfect time for smaller investors to explore investing in venture capital, as less capital which should lead to better returns.
- Venture capital is not an asset class. One of the articles quotes a pension official as saying venture capital is an asset class. In my opinion, venture capital is not an asset class, but should be considered an attractive opportunity within the Alternative Assets asset class. When an investment strategy is deemed an asset class, institutions tend to create target allocations to the strategy, which can lead to over-investment in venture capital, just as the industry has experienced in the past 13 years or so.
Links to articles: