June 2021 issue editorial by James Mawson, editor in chief, Global Corporate Venturing
“Then what makes a beautiful human being? Is it not the presence of human excellence? Young friend, if you wish to be beautiful, then work diligently at human excellence. And what is that? Observe those whom you praise without prejudice.”
These words from Epictetus’ Discourses could have been written more than two thousand years ago with David Swensen, head of Yale University’s $31.2bn endowment, in mind.
Swensen’s great insight from joining Yale in 1985 was that investors paid a premium for liquidity. This allowed him and other long-term investors to reap better returns – an average of 12.4% a year for the three decades to mid-2020 – by moving more heavily into venture capital and other alternative investments.
Almost a quarter of Yale’s endowment, so nearly $8bn, is in VC. But as Swensen led other investors into private capital markets, so they have started to blur with public markets for liquidity.
This quarter, Singapore state-owned Temasek and mutual fund manager BlackRock set up Decarbonization Partners as a climate-focused venture fund and committed an initial $600m. It aims to raise a total of $1bn with input from external institutional investors. This asset management strategy of building VC products to appeal to investors is related but separate from the strategic financial technology interest.
As the secondaries market matures, this encourages further the flow of capital from mutual and hedge funds as well as the traditional endowments and family offices, which has made private markets effectively as deep for new issuance as public stock markets with a record $125bn of VC deals in the first quarter. Corporations and universities had traditionally partaken through their pension and endowment funds but the search for returns as well as strategic imperative is now driving more direct investment.
Hence the drive for corporate and university venture funds to invest directly in startups as well as commit to VC funds. But to do this well requires learning from best.
Swensen was a natural teacher, through his book, Pioneering Portfolio Management: An Unconventional Approach to Institutional Investment, and teaching generations of investors, such as MIT’s Seth Alexander, Princeton’s Andrew Golden and Lei Zhang, the founder of the Asian private equity giant Hillhouse Capital Group, the Financial Times noted in its obituary of Swensen, who passed away last month at 67 of cancer.
For those direct investors navigating the now more liquid private investment world having other teachers steeped in decades of insights is a gift.
The demand for GCV Institute courses as well as the appetite for collaboration through the Global Healthcare Council (see special quarterly supplement), among others run by CVCs for CVCs, indicate the hunger and support from those in the community as well as the parent companies to learn from the best.
