Insight
Grefenstette: Institutional career risk aversion distorts asset allocation more than allocators admit
“Career risk aversion is a real thing, and it's an insidious thing, and it probably affects asset allocation and manager selection more than people are willing to admit.”
Insight
Illiquid assets, small caps, and equities will outperform long-term
“We believe over long periods of time, Illiquid's going to outperform liquid. Small's going to outperform large. Equities are going to outperform fixed income.”
Assertion Not publicly verifiable
Dietrich Foundation returns rank first across major institutional surveys
“Fortunately, we have been performing, as far as we can tell by all reported surveys, our returns are number one for the trailing in 1015, and 20 years.”
Disclosure
Dietrich Foundation currently allocates 90% of its portfolio to illiquid assets
“As we sit here today, we're 90% illiquid, which is pretty much the upper threshold of my comfort.”
Disclosure
Dietrich allocates roughly 55% of its private portfolio to venture capital
“So if I take the 90 as a whole pie, a hundred percent, probably 55% of that pie is venture. And then the other is split evenly, roughly, between growth equity funds and buyout funds. We don't touch any real estate. We do very little in the energy space.”
Opinion
Institutional CIOs avoid cheap Chinese assets due to career risk
“It's not easy because there can be screaming opportunities and China might be perfect example today where intellectually a lot of CIOs know these valuations are getting unjustifiably cheap. But back to career risk. They don't want to walk in, in front of their…”
Assertion Not checkable as stated
Dietrich Foundation's China portfolio generated $160M in excess liquidity
“In fact, our portfolio in China over the last 10 years produced a hundred and sixty million of excess liquidity. One hundred and sixty million distributions over capital calls over the last decade in our China book.”
Opinion
China's official GDP figures are inaccurate but directionally correct
“Those GDP numbers are all wrong, by the way, but they're directionally correct.”
Insight
Taking half-bite fund allocations on lower conviction is a dangerous trap
“It's good discipline, I think, to be biased toward equal weighting, because there's a tendency to say, okay, well, I'm not quite sure about this one. Let's do a half of a bite on this one and see what happens. I think that's a very dangerous, slippery slope to…”
Opinion
Historical private equity outperformance and manager persistence are under pressure
“The evidence of persistence of high quality funds and that premium, they're both under pressure. So this is not an easy game, but we think it's still worth playing.”
Assertion Supported
U.S. public equity market concentration is at a 100-year high
“If you take the top decile relative to the remainder public securities in the U.S., it's at three X. It's the highest ratio Market cap in a hundred years.”
Opinion
Vertical AI applications may be more attractive than commoditized platform layers
“People are just buying their share of time, and the more interesting plays from this point forward might be the verticals that sit atop.”
Opinion
LPs agreeing to American deal-by-deal carry waterfalls is absurd
“So professionally, I wonder how any LP could agree to terms where there's an American waterfall. Okay, and for those who are uninitiated on this topic, an American waterfall pays the GP a carry on a deal-by-deal basis. Okay, imagine the absurdity of this in an…”
Insight
Grefenstette: Investors cannot time venture capital and need vintage diversification
“Can't time venture capital. Be steady and consistent. If anything, the last six, seven years has taught us, reminded us that vintage year diversification is critical.”
Insight
Grefenstette: Peak 2021 market behavior data helps LPs distinguish skill from luck
“It's hard to distinguish luck from skill when everything is up and to the right. But now you can look back and say, okay, what did you do in 20 and 21 and 22? How sensitive were you to these really high valuations? How disciplined were you in deploying the cap…”
Prediction Not checkable as stated
Grefenstette: India's venture capital ecosystem will develop a robust exit market soon
“India will probably follow that path in the next 10 years, and it will be a robust exit market there as well.”
Insight
Grefenstette: An influx of copycat sector pitch decks signals a cycle peak
“Increasingly we've seen this pattern where there might be a targeted sector that we hadn't heard anyone spending a lot of time on, and then suddenly we get eight, nine people sending us decks highlighting this sector thesis. I want to pick on sports There are …”
Insight
Micro-market private equity returns mirror venture capital distributions
“That's an incomplete metaphor, and that modest waves can also capsize a small ship. So the distribution of returns looked more like a venture portfolio. We had a horrible zero transaction, and we had an eight X.”
Insight
Institutional outperformance requires embracing an uncomfortably idiosyncratic portfolio
“You can't possibly target a performance over the long period that outperforms everyone else unless you're willing to embrace an uncomfortably idiosyncratic portfolio, and part of that has to be a willingness to look wrong some periods of time, something becaus…”
Disclosure
Dietrich Foundation received $1.4B in private distributions over ten years
“If you look at our last 10 years, we've gotten distributions of 1.4 billion dollars. On capital calls of one billion. So that's four hundred million.”
Disclosure
Dietrich Foundation splits its venture portfolio equally between US and international
“That venture piece is probably split Evenly, roughly, between the U.S. And non-U.S. Most of the non-U.S. In venture is in emerging Asia and Latin America. Little bit in Europe.”
Disclosure
Dietrich heavily targets special situations buyouts anticipating market distress
“Most recently, I'd say the last five or six years, We've been really leaning in on the special situation subsector within buyouts because we think there's going to be some challenges ahead and some shoes are going to fall.”
Disclosure
Dietrich Foundation dramatically slowed its allocation pacing to China
“So we put pencils down. We haven't stopped looking. We haven't stopped investing entirely in China, but our allocation pacing has changed dramatically.”
Insight
A private market GP who lacks fear about execution is concerning
“If a GP doesn't have any fear about execution, I have a lot of fear.”
