The Ledger
Every statement that passed quotation and attribution checks. Mix any filter with any other: certainty 1/5, debate potential 5/5, or both at once.
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Grefenstette: China venture capital is the world's least crowded trade right now
“Right now it's the least crowded trade in the world is China venture.”
Dietrich Foundation's massive venture allocation features a heavy China and India focus
“Our focus on China and India, it's a big chunk of our 52% that's venture.”
Grefenstette: Venture pricing is most distorted in early-stage AI startups
“The pricing is probably most distorted in the early stage about AI, because you look at these companies, and of course, no one has a crystal ball, but you're looking at something and saying, hey, this could potentially be a trillion-dollar outcome. The bet is …”
Grefenstette: 80% of founders pitching a16z use cheap open-source Chinese LLMs
“I think Andreessen came out recently and said, 80% of the founders that come to them are using open source Chinese LLMs, because it might be 70, 80% as effective, efficient, but it's a 10th the cost.”
Unconstrained mean-variance optimization pushes institutional portfolios entirely into private assets
“And anytime you use the mean variance optimization model, unconstrained, it pushes you entirely into privates, because that's the historical return profile.”
The Dietrich Foundation operates entirely without an investment committee
“Yeah, he put in the controlling trust document the fact that he wanted the trustees to delegate investment authority to the CIO and CEO of the foundation. That's unusual. We do not have an investment committee.”
Separating asset allocators from governance oversight enables necessary boldness
“Career risk aversion drives a lot of behavior, and Bill felt to the extent you could put some distance between the asset allocator and the oversight or governance group, you had a shot at allowing the CIO to be more bold, because Bill always said, boldness is …”
Dietrich Foundation has held zero direct U.S. index exposure since 1997
“We have not had a direct exposure to the U.S. S&P. 500 or any U.S. Index since 1997, ok?”
Public equity offers lower expected returns as the price of liquidity
“I think private equity is true equity return, and public equity is a discounted or a lower expected return.”
Dietrich Foundation's total portfolio exposure to China peaked at 38% in 2020
“We peaked at a total portfolio exposure in China of 38% in late twenty-twenty, which is a big number. Today, as we sit here, we're about 19 or 20%.”
Multi-billion VC funds need 50% concentration in few winners to 4x
“When they see a company they've backed in the seed in Series A, they will lean in hard on the subsequent Rounds to the point where at the end of portfolio construction, they might have 40, 50% of the fund in three or four companies. That, to us, is exactly how…”
Grefenstette is skeptical of LP claims that co-investments beat underlying funds
“So I'm skeptical of those who have large co-investment programs who claim they're outperforming the underlying fund managers, because it's hard, and if they're doing a better job than their GPs, they should bring their GPs in and give them some instruction.”
A European GP waterfall requires 5.6x gross to deliver 3x net
“We have a European GP. We actually are underwriting right now. We really like the firm, but the way the waterfall is calculated and the fact that the GP is actually charging some fees to the portfolio companies, they need to generate a 5.6 X gross to hit a thr…”
Grefenstette: Dietrich Foundation allocates an outlier 52% of total NAV to venture
“Dietrich Foundation is 1.6 billion in total assets, and we have pretty unusual allocation where about 90% of our assets are in private strategies. Venture capital alone is around 52% of the total NAV right now, which is quite the outlier”
Grefenstette: Some institutional endowments have 5% of total NAV in SpaceX
“Maybe they have, maybe five percent of the total NAV is in SpaceX. And this is the actual case for some institutions out there.”
Grefenstette: VC capital calls exceeded distributions by $200B since 2022
“Since 2022, liquidity has been negative cash to LPs of about two hundred billion capital calls in excess of distributions.”
Grefenstette: 40% of US unicorns have not raised capital since 2021
“It's 40% of the, call it 1000, Private unicorns in the U.S. Have not raised capital since 2021, I think, or 22.”
Grefenstette: New limited partners entering venture in 2020 face tough vintages
“There are a lot of new entrants, new LPs who came in to venture in, unfortunately, 20 and 21. These are gonna be tough vintages.”
Grefenstette: Tourist limited partners retreating from venture is healthy for the ecosystem
“Some of those tourists are gonna go to the sidelines for a while. That would be very healthy for the ecosystem.”
Grefenstette: Dietrich Foundation re-backs returning venture GPs who autopsy past mistakes
“Some LPs won't give them a second chance. We have done that where we have said to a GP, okay, we all know this is what went wrong here, and we can do the autopsy. And then we still supported them when they came back to the market because we think they're going…”
Grefenstette: Small early-stage VCs hold structural relationship advantages over mega-funds
“That's where Sean's comment earlier about the personal connective tissue between the GP and the founder, the special founders, is why there will always be an advantage of the small early stage investor because, and I want to pick on anyone like Andreessen, but…”
Grefenstette: Solo capitalists suffer from lacking internal partners to challenge their decisions
“The higher probability problem when solo capitalists is they don't always have another adult to challenge them, and that's a huge criticism of the model.”
Grefenstette: European founders aggressively seek US venture capital firms by Series A
“A lot of the conclusions we've reached is that you might be able to find some early stage GPs locally there, but as soon as a company hits the Series A, those founders are looking for U.S. Firms.”
Grefenstette: Venture managers cannot reliably identify fund breakout winners at first check
“You have 30 positions in the VC fund, and only a couple are going to outperform the entire fund. I know the GP isn't good enough to identify what those companies are at the point of first check.”
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.”
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.”
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.”
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.”
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.”
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…”
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.”
China's official GDP figures are inaccurate but directionally correct
“Those GDP numbers are all wrong, by the way, but they're directionally correct.”
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…”
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.”
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.”
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.”
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…”
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.”
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…”
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.”
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 …”
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.”
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…”
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.”
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.”
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.”