Technology Transfer from the Venture Capital Perspective

Symposium on Technology Transfer for Small Business

Venture Capital Enervest

Draft of a letter concerning Columbine; letter has proofreading marks

Congratulations letter

Congratulations on Franklin-Jefferson awar

Memorandum and IBM publication

Memo to general partners about IBM, attached marketing folder includes materials that describe the business and the services they are offering to software vendors

Why Funds of Funds?

Private equity funds of funds (FOFs) have become big business. Today, FOFs form 14% of new money raised. I test six explanations for the rise of FOFs. First, I find that FOFs do not generally deliver superior returns. They do, however, do well enough for the limited partners (LPs) that hire them. Second, FOFs allow small LPs to scale upward, to invest in more funds. However, I find that they do not contribute to diversification. What they really do is to provide smaller LPs avenues to lower the cost of fund management. Third, FOFs allow large LPs to scale downward, to invest vast amounts over a short duration. However, the mechanism is imperfect because LPs can either use many FOFs and risk coordination problems among them or few FOFs and risk getting held up. Fourth, FOFs are used by LPs with weaker governance structures. Fifth, there is some evidence that LPs use FOFs to learn to invest in new areas, but the support is weak. Last, the use of FOFs is partly due to cyclical booms.Venture capital; agency; economies of scale; outsourcing

Why Funds of Funds?

Private equity funds of funds (FOFs) have become big business. Today, FOFs form 14% of new money raised. I test six explanations for the rise of FOFs. First, I find that FOFs do not generally deliver superior returns. They do, however, do well enough for the limited partners (LPs) that hire them. Second, FOFs allow small LPs to scale upward, to invest in more funds. However, I find that they do not contribute to diversification. What they really do is to provide smaller LPs avenues to lower the cost of fund management. Third, FOFs allow large LPs to scale downward, to invest vast amounts over a short duration. However, the mechanism is imperfect because LPs can either use many FOFs and risk coordination problems among them or few FOFs and risk getting held up. Fourth, FOFs are used by LPs with weaker governance structures. Fifth, there is some evidence that LPs use FOFs to learn to invest in new areas, but the support is weak. Last, the use of FOFs is partly due to cyclical booms.Venture capital, private equity, agency, economies of scale, outsourcing

Columbine Venture Fund Letter

An official announcement of Duane Pearsall\u27s retirement to the limited partners of Columbine Venture Fund

Survivor Funds

This Article explains how to create “survivor funds”—short-term investment funds that would pay more to those investors who live until the end of the fund’s term than to those who die before then. For example, instead of just investing in a ten-year bond and dividing the proceeds among the investors at the end of the bond term, a survivor fund would invest in that ten-year bond but divide the proceeds only among those who survived the full ten years. These survivor funds would be attractive investments because the survivors would get a greater return on their investments, while the decedents, for obvious reasons, would not care. Survivor funds would work like short-term tontines. Basically, a tontine is a financial product that combines features of an annuity and a lottery. In a simple tontine, a group of investors pools their money together to buy a portfolio of investments, and, as investors die, their shares are forfeited, often with the entire fund going to the last survivor. For example, imagine that ten 65-year-old men each contribute $1000 to a fund that buys a large diamond for$10,000 and that the men agree that the last “survivor will get the diamond. Accordingly, after the ninth man dies, the tenth man gets the diamond, and he can keep it or sell it. Of course, the survivor principle—that the share of each, at death, is enjoyed by the survivors—can be used to design financial products that would benefit multiple survivors, not just the last survivor. For example, elsewhere, we showed how tontines could be used to create so-called “tontine annuities” and “tontine pensions” that would benefit lots of retirees. In this Article, we show how the survivor principle can be used to create survivor funds that would only make payments to those who survive for a specified number of years

Reward-to-risk ratios of funds of hedge funds

This chapter examines whether the fund of hedge fund portfolios dominate the U.S. equity and bond markets based on alternative measures of reward-to-risk ratios. Standard deviation is used to measure total risk and both nonparametric and parametric value-at-risk is used to measure downside risk when the reward-to-risk ratios are constructed. We find that the fund of funds index has higher reward-to-risk ratios compared to several stock and bond market indices. This result is especially strong when the risk measures are calculated from the most recent year’s data and is robust as the measurement window is extended to four years

Risk and expected returns of private equity investments : evidence based on market prices

We estimate the risk and expected returns of private equity investments based on the market prices of exchange traded funds of funds that invest in unlisted private equity funds. Our results indicate that the market expects unlisted private equity funds to earn abnormal returns of about one to two percent. We also find that the market expects listed private equity funds to earn zero to marginally negative abnormal returns net of fees. Both listed and unlisted private equity funds have market betas close to one and positive factor loadings on the Fama-French SMB factor. Private equity fund returns are positively correlated with GDP growth and negatively correlated with the credit spread. Finally, we find that market returns of exchange traded funds of funds and listed private equity funds predict changes in self-reported book values of unlisted private equity funds