In this article, Why Institutional Investors Should Double Down on VC, Dan Malven of 4490 Ventures summarizes the findings of a working paper, “Has Persistence Persisted in Private Equity? Evidence from Buyout and Venture Capital Funds,” researched and written by Robert S. Harris, Tim Jenkinson, Steven N. Kaplan & Ruediger Stucke, and published by the National Bureau of Economic Research (NBER).
The paper, published in November 2020, contradicts the conventional wisdom that only a small handful of marquee VC managers are worthy of investment by institutional investors.
Instead, using a data source that was previously unavailable to researchers, the researchers found that VC firms’ outperformance is much more broadly distributed than previously understood. The decades-long belief has been that only top-quartile VC funds outperform public equities, but the data show that half of all VC fund managers outperform the public markets, and are therefore worthy of institutional investment.