The performance of active equity funds that incorporate venture capital

Nohl J. Schwandtner and David M. Smith

Finance Research Letters, 2025, vol. 77, issue C

Abstract: We examine actively managed equity portfolios that incorporate venture capital (VC). VC investments carry a high expected return and likely diversification benefits. However, access to the best deals may be reserved for investors with specialized business knowledge to assist target-firm management. Based on PSN data from 2000 to 2022, we document that funds incorporating VC trail their benchmarks and matched non-VC counterparts on a variety of investment-performance metrics. This underperformance suggests that traditional equity portfolio managers fail to access value-enhancing VC opportunities, and their investors do not gain from the excursion into that adjacent asset class.

Keywords: Security markets; Portfolio choice; Investment decisions; Venture capital (search for similar items in EconPapers)
JEL-codes: G1 G11 G24 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:77:y:2025:i:c:s1544612325004180

DOI: 10.1016/j.frl.2025.107155

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