Igor Sill, managing director of the tech-focused private equity firm Geneva Venture Group, discusses how tech investors can garner higher overall returns coupled with lower investment risk through funds of funds. Views are the author's own but this website is grateful for permission to publish them. As always, responses are welcome.
The global venture capital industry is undergoing major changes as Wall Street embraces dozens of new initial public offerings of venture-backed companies. Hopeful investors are again flocking to this alternative asset class as these venture capital investments continue to deliver positive returns at a better rate than public market indexes such as NASDAQ, FTSE or S&P. The venture-backed technology sector led on NASDAQ trading volume with 44 companies going public last year.
As pensions, endowments, family offices, foundations and institutional investors increase their venture allocations, they are also applying closer scrutiny of reported venture fund performance. These investors are recognizing greater opportunities to generate excess returns but are resource-constrained on due diligence, accurate performance comparisons and audit reviews. Many seek advice from independent accounting firms and law firms to decipher reported returns. And many delegate the oversight function to specific fund advisory organizations. A recent study by Casey & Quirk projects that outsourced investment assets in the US alone have grown to $510 billion as of this year.