Nathan Anderson

Response to LP concerns on liquidity and recent underperfromance of PE overall including VC: Part 2 Managing assets for my family, having managed public and private funds, being GP and LP, direct investor and allocator, I sincerely care for the necessity of a stable and functioning investment process proving by results but also the importance of liquidity. And even if I am confident that we could deploy and generate DPI considering our track record, dual institutional and corporate investing expertise and experience, and both deal flow and due diligence driving our investment process, I want to prioritize DPI on recycling and try to return capital first. And I am proposing a significant sliding scale to LPs who are open to follow us and work with us in this emerging phase of want I see as a platform and certainly not a one time fund. Performance of venture net of fees, as shown in this Cambridge study, put the sub asset class at par with NASDAQ total return on 5, 10, 15, 20 and 25 years more or less. Over 20 years: US venture capital has been among the top performers but not consistently the single best. US buyout and growth equity often have similar or higher pooled net IRRs depending on the end date. However, on a global Public Markets Equivalent (PME) basis vs. public markets, top-quartile VC significantly outperforms, while median VC lagged. Over 15 years: Venture’s outperformance is highly sensitive to inclusion of the 2009–2012 “golden” AI/cloud/mobile vintages. In many series, US VC ranks at or near the top net of fees, but large buyout/growth can be close. Over 10 years: US VC has often led on pooled net IRR and PME (driven by 2010–2014 vintages and the 2020–2021 exit boom), but results moderated after 2022 markdowns. Recent updates show narrowed gaps versus buyout/growth. And lots of median and now zombie VCs are dying, having raised in the heydays of 2018-2021 and unfortunately also deployed without consideration for the rationales of valuations and the filters of revenue, gross and contribution margins, revenue to capex ratios and cash conversion scores or capital efficiency of fundraising generating revenue vs being burnt in fumes in excesses of all sorts... Since I started investing with my grandfather a long time ago, I don't recall a single year without risks and doubts, corrections that for me are natural sub-cycles. This period is riddled with uncertainty with regulatory, tariffs, geopolitics, still unfortunately wars and higher interest rates but it won't stop the secular tech, innovation and sustainability trends to solve the fundamental issues of our world driven by demographics and finite resources.

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Davidson Kempner's Suzanne Gibbons just published something that explains the private credit attention: the leverage numbers aren't real. Direct lending reports 5x. Strip out the accounting adjustments? 6.9x. That's the widest gap since 2015, when add-backs were half what they are today. Here's the problem: many of those adjustments are aspirational. Projected synergies fail to materialize, leaving capital structures more fragile than headline metrics suggest. Within the Kroll StepStone direct lending universe, loans with stressed interest coverage have more than doubled from 14% at year-end 2019 to 32% most recently. When stress hits, the gap between reported and real leverage matters. A 1.9-turn difference can raise loan-to-value ratios from 45% to 64%, leaving lenders with a meaningfully smaller cushion. The firms that sized to real leverage, not adjusted numbers, built different assumptions from the start. FT.com #PrivateCredit#PrivateCreditRecruitingAI

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The U.S. stock market rebounded on September 26th. A doji pattern formed the day before (September 25th) and successfully rebounded. Even if rebalancing adjustments lead to selling by the end of the month, U.S. stock investors should actively buy. They should preemptively buy in preparation for the October interest rate cut. A rate cut could push the S&P 500 index up an additional 100-150 points, so U.S. stock investors should actively buy whenever the U.S. stock market fluctuates. As mentioned previously, an interest rate cut is another form of quantitative easing. A rate cut eases multiples. Let's abandon the perception that the U.S. stock market is overvalued and adopt a positive mindset. #BigRally #Nasdaq #S&P #stockmarket #Dow

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