The Disadvantages of an Elite Education

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Re: The Disadvantages of an Elite Education

Postby Goat Fan » Sat Jan 14, 2017 1:52 pm

We have access to lots of VC/PE deals at my firm. I steer clear of them because evidence and experience suggest that if they don't outright suck (which the vast majority do), fees will eat up every bit of the excess return and then some. To cite one example, I did an analysis for a client who invested a large portion of his net worth in a couple of private real estate deals with a legendary Bay Area firm. Over the period in question, the gross return was 17% annualized, after the 2 and 20 it was 12% annualized, .1% less than the return of the Vanguard ETF ticker VNQ over the same time frame, the only difference being that VNQ doesn't have a lockup and won't surprise you with a capital call when something goes wrong.
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Re: The Disadvantages of an Elite Education

Postby mwalsh88 » Sat Jan 14, 2017 7:31 pm

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Re: The Disadvantages of an Elite Education

Postby creamy » Mon Jan 16, 2017 5:15 pm

Goat Fan wrote:We have access to lots of VC/PE deals at my firm. I steer clear of them because evidence and experience suggest that if they don't outright suck (which the vast majority do), fees will eat up every bit of the excess return and then some. To cite one example, I did an analysis for a client who invested a large portion of his net worth in a couple of private real estate deals with a legendary Bay Area firm. Over the period in question, the gross return was 17% annualized, after the 2 and 20 it was 12% annualized, .1% less than the return of the Vanguard ETF ticker VNQ over the same time frame, the only difference being that VNQ doesn't have a lockup and won't surprise you with a capital call when something goes wrong.


This is fair enough.

I will defend angel investing to the death of me, because there are no management fees and lots of upside, but you do have to 1) get access to a lot of deals and get a sense for what will work and what won't and 2) have enough capital to invest in a number of companies, not just one, and then double down on a few winners.

I suppose that this is irrelevant to colleges because (as far as I know) they all work with managed funds instead of hunting their own deals in house, plus at the scale they have angel investing won't make a dent unless you hint Pinterest/FB.
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Re: The Disadvantages of an Elite Education

Postby Narddog » Tue Jan 17, 2017 1:51 pm

creamy wrote:I suppose that this is irrelevant to colleges because (as far as I know) they all work with managed funds instead of hunting their own deals in house, plus at the scale they have angel investing won't make a dent unless you hint Pinterest/FB.


We hunt our own deals and have (recognizing there are more restricted pots of funds than others) ~$100 billion to work with, but I acknowledge UC is unique in this regard.
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Re: The Disadvantages of an Elite Education

Postby mwalsh88 » Tue Jan 17, 2017 4:08 pm

The odds of winning with Angel Investing are so perilously low, that any return/exits you might enjoy are swamped by the losers.

Stick to a simple 60/40 portfolio of ETFs. Anything you might make w/ an improved strategy, you lose in taxes. It is simply not worth it.
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Re: The Disadvantages of an Elite Education

Postby Juan » Tue Jan 17, 2017 8:57 pm

Old guys are on my side! Suck it millenials.
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Re: The Disadvantages of an Elite Education

Postby creamy » Tue Jan 17, 2017 9:30 pm

mwalsh88 wrote:The odds of winning with Angel Investing are so perilously low, that any return/exits you might enjoy are swamped by the losers.

Stick to a simple 60/40 portfolio of ETFs. Anything you might make w/ an improved strategy, you lose in taxes. It is simply not worth it.


I said I'd defend angel to the death of me, and I will make good on that. You have to be deeply involved in the space you're investing in, be smart about it (10 initial investments, dry powder to follow on) and be patient. Most people who lose big on angel investing mess up those two golden rules. And, ideally, you've been in the tech space long enough to actually add value and help the odds of your companies.
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Re: The Disadvantages of an Elite Education

Postby Goat Fan » Wed Jan 18, 2017 10:35 am

Narddog wrote:
creamy wrote:I suppose that this is irrelevant to colleges because (as far as I know) they all work with managed funds instead of hunting their own deals in house, plus at the scale they have angel investing won't make a dent unless you hint Pinterest/FB.

We hunt our own deals and have (recognizing there are more restricted pots of funds than others) ~$100 billion to work with, but I acknowledge UC is unique in this regard.


$100 billion??
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Re: The Disadvantages of an Elite Education

Postby Narddog » Wed Jan 18, 2017 11:30 am

Goat Fan wrote:
Narddog wrote:
creamy wrote:I suppose that this is irrelevant to colleges because (as far as I know) they all work with managed funds instead of hunting their own deals in house, plus at the scale they have angel investing won't make a dent unless you hint Pinterest/FB.

We hunt our own deals and have (recognizing there are more restricted pots of funds than others) ~$100 billion to work with, but I acknowledge UC is unique in this regard.


$100 billion??


Yep, breakout buried earlier in this thread, so posted here again:

Our CIO manages ~$100 billion. That isn't simply UC's endowment (~$9 billion), but also our pension investments (~$55 billion), working capital (~$14 billion), and non-pension retirement savings (~$20 billion).
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Re: The Disadvantages of an Elite Education

Postby Hildog » Wed Jan 18, 2017 1:30 pm

Walsh what do you mean by 60/40? 60 stock 40 bond? And for what/whom are you recommending that?
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Re: The Disadvantages of an Elite Education

Postby mwalsh88 » Wed Jan 18, 2017 4:13 pm

Hildog wrote:Walsh what do you mean by 60/40? 60 stock 40 bond? And for what/whom are you recommending that?


Something like that. Depending on your age, how much you have already saved, etc.
Some might suggest 70/30, as bonds might be a secular high. But who the hell knows.
I'd suggest everyone talk to an agnostic professional before putting your $ down. Vanguard has a pretty good service now.
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Re: The Disadvantages of an Elite Education

Postby Narddog » Wed Jan 18, 2017 6:29 pm

Yeah, this is great. My buddy is one of the leads on the project. One of the great things about this is that these measures help create more equal footing between the elites and the working class institution (better articulated here: https://www.nytimes.com/2017/01/18/opin ... leges.html)

More here about their general work: http://www.equality-of-opportunity.org/
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Re: The Disadvantages of an Elite Education

Postby GoatMP » Thu Jan 19, 2017 8:44 am

mwalsh88 wrote: Vanguard has a pretty good service now.


I thought they were an online-only Fin Advising service, rather than a personal advisor. Also, appears to be $50K minimum...

I looked into it a few months ago, perhaps has changed since...
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Re: The Disadvantages of an Elite Education

Postby corn diesel » Thu Jan 19, 2017 9:04 pm

Definitely don't need $50k. I think you need $1k, maybe 2, to open a Roth IRA with them. Also, read anything written by John Bogle, the guy who started Vanguard. He's the most straightforward anti-bullshit guy in investing. His views are strictly empirically informed. He's really easy to read. And his stuff is really interesting. If it's your first foray into index fund investing, it might even blow your mind.
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