Impact of Latest Macroeconomic Factors for Venture Fund Investors
CEPRES supports all those impacted by the fallout from SVB and the venture downturn.
With the recent failure of Silicon Valley Bank (SVB) many people have been impacted and the full fallout is still unclear. CEPRES’ role is to help institutional investors (LPs) better handle the risks and impact on their portfolios. Last year CEPRES published a whitepaper on the impact of the Venture slowdown on investors' portfolios. The adjusted Forecast scenarios were implemented in June 2022 into CEPRES Predictive Intelligence so clients could adjust their cash pacing and portfolio planning to mitigate the risks.
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Report summary
Private markets headwinds have led to difficulties raising new capital and sparked concerns that venture capital funds will be highly impacted. Furthermore, the FED increased the base rate which led CEPRES to revise assumptions for venture capital investments based on historical data — especially from the dotcom bubble of 2000/2001. While differences exist between then and now, it makes sense to use it as an analogy to derive a stress scenario. Historical data shows that the concrete vintage year plays a crucial role and we find two focal points of adjustments: a reduction of lifetime return expectations (TVPI benchmarks) for certain vintage years and a partial deferral of the expected distributions in the next three years…