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Bill Gurley makes the case for why retail access to private equity and venture capital could result in bad outcomes "If you come into it with a public market mindset, thinking that every set of financials I have been handed is audited and correct, it's just not the case"

97,888 views • 8 months ago •via X (Twitter)

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Chamath: “Private equity in general is totally hosed.” 🏢🚨 “I think the history of this is important.” “There was a long standing belief that the best way to generate the best risk adjusted return was to have what's called a 60/40 allocation. 60% to bonds and 40% to equities.” “Over many years, especially when we artificially suppressed rates at zero, a lot of people started to move their allocations away from 60/40 and they started to make more and more investments further out on the risk curve.” “The biggest beneficiaries of that were venture capital, private equity, and hedge funds.” “The thing with private equity is that because rates were zero, they had an infinite amount of borrowing capacity at very little downside to them, and so they were able to manufacture returns much faster than venture capital and hedge funds could.” “So as a result, you had an initial group of people that were defining the asset class, making a ton of money, and then you had all these fast followers that said, ‘Well, if they're doing it, I can do it too.’” “But then always what happens is then you have this flood of laggards that just flood the zone.” “And it's these laggards that make it very difficult to generate returns because they start overpaying for assets, they start mismanaging and under managing the assets that they do own.” “That created a lot of competition, and so that's why you see this hockey stick graph.” “And when you see that kind of graph, it doesn't matter what asset class it is. The returns go to zero.” “And so we've seen this in venture capital. We've seen this in hedge funds. And we're now going to see this in private equity.”

The All-In Podcast

800,205 views • 10 months ago