Investment bubble — will VC industry get hit?
Some noteworthy comments today from Mark Anson, chief investment officer of California Public Employees’ Retirement System, one the nation’s largest investors in venture capital funds.
He warns of a bubble in the “private equity” industry, which includes venture capital firms, but also buyout funds and hedge funds. According to the Reuters story, he didn’t say much about venture capital, but focused mainly on the hedge fund and buyout industries. Low interest rates, he said, have encouraged investors in these sectors to leverage funds to pour into the sector, resulting in lots of people chasing deals, possibly pushing down long-term returns for everybody. They may also be squeezed badly if interest rates go up.
“The biggest one (asset bubble) I’m afraid of at the moment is private equity,” he said, according to Reuters. “The current overhang of leveraged buyouts committed but not invested is $182 billion (end-2003 figure). A lot of money is chasing high yield. Hedge funds are competing with buy-out managers and that convergence scares me.”
Seems more of a problem for East Coast (more heavily reliant on buyout, hedge fund), than for West Coast (venture capital), but in the end, we’re all connected.
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About the Author, Matt Marshall
Matt launched VentureBeat in September of 2006, with the realization that no one else was covering the entrepreneurial and tech innovation scene with the velocity or depth that he was. Prior to founding VentureBeat, he covered venture capital for the San Jose Mercury News from 2001 to 2006. In 2002, Matt was awarded "Journalist of the Year" by the Northern California Society of Professional Journalists. Prior to working at the Merc, he was a correspondent for the Wall Street Journal in Bonn, Germany from 1995 to 1998, and a writer for the Washington Post in 1994. Matt holds a PhD in Government and an MA in German and European Studies from Georgetown University. In addition to VentureBeat, Matt is also the Executive Producer of DEMO, the leading launchpad event for emerging technologies.
