David Clark shares a peek into how the relationship between capital calls and distributions from VenCap International plc's portfolio has trended over the past decade. ?? What do we see? The cyclical nature of VC liquidity. While distributions have slowed recently, the seeds planted in downturns can pay off years later, with current distributions outpacing calls. Advice for investors on how to handle these ups and downs from David Clark ?? "Most importantly you should try to keep a consistent investment pace. This is harder than it sounds as it’s really tough to say no to managers with good performance at the top of the market. But if you don’t overcommit at the top of the cycle it allows you to keep investing as the market corrects. Also, you need to create a liquidity buffer in your overall portfolio that means you don’t have to stop investing, or worse still become a forced seller, when liquidity dries up." #VC #OpenLP
Given the lack of liquidity in the VC market for the last couple of years, I thought it would be interesting to share some details on how the relationship between capital calls and distributions from our portfolio has trended over the last decade. This is a summary across all VenCap funds so represents a mature portfolio that continues to make new commitments. A few key points to focus on: - VC liquidity comes in waves. But you need to have been investing 10 years earlier to capture the wave. A big chunk of our 2021 distributions came from funds we backed during and just after the 2009 Financial Crisis. You need to plant the seeds and then be patient. - Distributions have fallen significantly over the last couple of years but they haven't dried up entirely. And they are still outpacing calls (just). - Average distribution yield for the last decade is 16.5% (will likely increase slightly as we get more distributions in Nov/Dec).
