Why Institutions Love Venture Capital

On average (venture capital) returns are terrific. That’s why most sophisticated pensions and endowments have come to the conclusion that allocating a portion of their total portfolio to venture capital (and other private equity investments, particularly when private equity funds were doing better) makes sense. Yale University’s endowment, often held up as a standard of investment excellence, has generated nearly a 30% average annual return on its venture capital and private equity investments since 1973. Their commitment is so great that the university has invested in a large satellite campus, west of Yale’s hallowed downtown New Haven, Connecticut campus, dedicated largely to scientific and technological research, has actively fostered entrepreneurial development in in its graduate business school, and has invested with thriving venture capital firms which have sprouted right in New Haven.

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