But while the venture capital and private equity models ultimately rely on the number of successful exits they can make, Neil Stanford, managing Director of V-Ignite and former head of private equity and venture capital at Hostplus, said the impending risk-off period will be good for quality capital allocators.
“Our industry is driven by a public market framework and I tend to rail against that,” Mr Stanford said.
“Public markets are not the final arbiter of value, in fact, public sentiment throws things all over the place and the markets have a great history of over-shooting and undershooting.”
Mr Stanford said managers needed to have discipline “not to run ahead in the good times, and the discipline to deploy when things aren’t great”.
Ms Misic agreed, adding tough times tend to throw up high-quality investment opportunities that other venture capital funds miss when they are too busy tightening the purse strings.
“If you look back at the vintage years after the GFC, that’s the time you’d wish you had deployed in,” she said.
“So to avoid missing out on those opportunities, we’ve set ourselves a minimum floor, so we can still get exposure to those good businesses.”
As investment managers with experience within large superannuation funds, the panel was asked whether the government’s early superannuation release program, installed in 2021 to combat a COVID-19-induced economic crunch, affected private investment attitudes.
“Yes, things like that do constrain how much super funds can allocate to the [private market] space,” Ms Misic said.
Mr Stanford said large-scale withdrawal events like that meant superannuation funds had to shift into a protective mode in case of a liquidity crunch.
“Some decisions were suboptimal, but we had to prepare and we didn’t want to be caught selling assets at firesale prices,” he said.
“These policies have flow on effects elsewhere and super funds don’t have many tools, like going to borrow more capital, if there’s a liquidity problem.”