Analysts believe that the recent decrease in LP interest in venture capital is more of a unique occurrence rather than a long-term trend.
The Los Angeles County Employees Retirement Association (LACERA) made a decision to lower its investment range in venture capital during a meeting on March 13.
The board of investments voted to decrease the range for venture capital and growth equity from 15% to 30% to 5% to 25% of the pension system’s private equity portfolio. Currently, LACERA’s venture portfolio makes up 10.8% of the PE portfolio.
Despite the success of the venture subset, with a TVPI of 2.08x, the highest among the private equity sub-strategies, the move to decrease allocation is seen as puzzling. The top performing funds in the portfolio are venture funds, including those from Union Square Ventures.
The main reason for the change was attributed to market conditions, with the goal of enhancing flexibility in investing strategies. This adjustment aims to free up capital for other investment opportunities, rather than reducing the size of the venture portfolio.
Experts believe that this change is more of an isolated incident and not indicative of a broader trend in LP interest in venture capital. In fact, there is a growing demand for venture services from LPs, as noted by Brian Borton from StepStone.
While some LPs may be investing smaller amounts, the overall trend indicates a stable LP allocation into venture capital for the year. There may be exceptions, but the general sentiment is that LP interest in venture capital remains strong.
