US TECH VENTURE FUNDS - AN INVESTMENT CATEGORY WITH GREAT POTENTIAL AND STRONG DIVERSIFICATION

Investing in alternative investments is used to optimise risk and return on your liquid portfolio of stocks and bonds. One asset class that is particularly well suited for this is first-quartile US venture funds. Based in Silicon Valley, the US has created the world's most mature and largest venture capital market, which is behind all the companies in the so-called "magnificent 7", today the world's 7 most valuable companies. Just 25 years ago, there was only one tech company, Microsoft, among the world's 7 largest companies.

Data shows that first quartile venture funds in the US have a negative correlation of -0.1 with large cap listed stocks, making them an ideal investment option for those looking to reduce risk in an already diversified portfolio. This means that the overall volatility of one's investment portfolio is smoothed out by holding such VC funds as a subset of it.

Higher Sharpe Ratio - Effective Risk Management

When we look at the ratios of venture funds in the US, it is clear that first quartile funds offer an attractive Sharpe ratio compared to other asset classes, such as similar Private Equity funds. The Sharpe ratio is a measure of how the return of an investment compares to its volatility, and first quartile US tech venture funds over the past 20 years have had a higher Sharpe ratio than, for example, private equity. This indicates that investors in this type of fund have received a better risk-adjusted return.

Private equity funds have historically been one of Denmark's favourite alternative investments. However, when it comes to US venture funds, which bear no comparison to their Danish, Nordic and European counterparts in terms of selection and diversification (often well over 100 underlying portfolio companies selected from +5000 screenings annually), first quartile funds have often outperformed private equity funds in terms of risk-adjusted performance.

Yale Endowment and Long-Term Exposure to Venture Funds

One of the most successful institutional investors, Yale Endowment has successfully integrated first quartile venture funds and fund-of-funds into its portfolio for decades. Since 1976, Yale Endowment has had separate exposure to these funds and achieved an average annual return of over 30%. This has been achieved by focusing on US first quartile funds and continuous presence across fund vintages.

Yale's approach to allocating funds to first quartile venture funds and fund-of-funds is a clear example of how professional investors have managed to capitalise on the potential of venture capital as a source of high growth and diversification. Their experience is a strong indicator that investors who choose to gain exposure to such venture funds can achieve very attractive long-term returns, especially when they allocate capital to funds with the right track record and management.

Nordic Bloom and Parallel Funds to US Tech Venture Funds

At Nordic Bloom, we have recognised the potential of offering investors access to the most successful US tech venture funds, often closed to new investors and often referred to as "by invitation only" funds. Our approach allows investors to gain the same benefits as the most experienced institutional investors, such as Yale Endowment, while enjoying the diversification and risk management that these types of venture funds offer.

Our expertise in venture capital and fund-of-funds strategies enables us to select the best partners to help our clients maximise their returns while protecting their capital from market fluctuations over time. We believe that first quartile US tech venture funds are an indispensable component of any long-term portfolio, and we are dedicated to offering our clients the best opportunities in the market.