Investing like the 0.0001%

As I launched my Rolling Fund this week I've been thinking about my decade working in the Venture Capital asset class. First, as an operator who has generated large returns for angel investors and VCs. More recently, as a consultant who has supported founders and given them massive ROI on their investment. I wanted to share some new learning I found.

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It used to be that you needed $100M+ to access the best alternative investments. But with the launch of my Rolling Fund it is safe and easy to invest in the high-risk asset class that is venture capital (VC).

What's the problem?

Individual investors invest too little in private markets (aka Alternative Investments). The average high net worth individual (HNW) invests 6% of their portfolio in Alternative Investments and 94% in Stocks and Bonds. This yields 2.5% - 5.4% annualized returns over the past 20 years.

According to this research by J.P. Morgan (as of January 31, 2021), this is the average US investor's portfolio and it underperforms over time, especially when adjusted for inflation.

What is a solution?

I'm predicting that the rules and laws will change within this decade that will allow more people to invest in the private markets. For now, if you're an accredited investor, you can access the people/funds who can access the best of these private markets.

By investing in Venture Capital you've added an Alternative Asset Class (e.g. Growth Equity, Real Estate, Natural Resources, Distress Securities, Buyout). The best investors allocated 50% of their portfolio to Alternative Investments and the remainder to Stocks & Bonds. This yields 8.8% - 12.4% annualized returns over the past 20 years.

According to this research by KKR Insights (May 2017 issue), professional investors, like Family Officers and Endowments, generate returns 4X greater than the average US investor.

Over the coming weeks I'll be diving into information asymmetry, models, and general thinking about VC.