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The performance of active equity funds that incorporate venture capital

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  • Schwandtner, Nohl J.
  • Smith, David M.

Abstract

We examine actively managed equity portfolios that incorporate venture capital (VC). VC investments carry a high expected return and likely diversification benefits. However, access to the best deals may be reserved for investors with specialized business knowledge to assist target-firm management. Based on PSN data from 2000 to 2022, we document that funds incorporating VC trail their benchmarks and matched non-VC counterparts on a variety of investment-performance metrics. This underperformance suggests that traditional equity portfolio managers fail to access value-enhancing VC opportunities, and their investors do not gain from the excursion into that adjacent asset class.

Suggested Citation

  • Schwandtner, Nohl J. & Smith, David M., 2025. "The performance of active equity funds that incorporate venture capital," Finance Research Letters, Elsevier, vol. 77(C).
    • Handle: RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325004180
    DOI: 10.1016/j.frl.2025.107155
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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