So I agree with the sentiment that marks are not useful however you can do an analysis of the "non-realized gains" and the age of each fund then compare that to benchmarks of other funds of the same year.
That's basically a backend way of figuring out how much of their returns are pie in the sky. One other thing to keep in mind to give a16z the benefit of the doubt is their funds are MASSIVE. Putting that amount of capital to work is hard- and relatively harder than Bessemer and the other funds they are compared to.
That said, the % of Fund III in particular that is non realized is fairly scary. I'd take a wager that it does not return capital. Note also A16z pretty quickly raised a new fund before a lot of these returns for 3 become clearer. That's just guessing on my part but I'd def bet III is not gonna be good. That said I still love a16z and the partners and their approach...I actually hope I'm dead wrong.
you can do an analysis of the "non-realized gains" and the age of each fund then compare that to benchmarks of other funds of the same year.
Just so I'm clear, the idea here is to look at all funds that started in the same year, average the non-realized gains, then compare that to the non-realized gains of the fund you're evaluating? How do you know whether the difference is how they mark vs. actual alpha?
Look at the funds a specific "vintage" year, then look at:
1) Realized Returns/ Total Size of Fund
2) compare above to prior vintage years of same partnership/ similar funds
3) Look at unrealized returns as a percentage for this vintage across funds and for same partnership for prior funds for same years out.
The bulk (like 80%) of unrealized gains can disappear in a quarter if you have a large market correction.
Some of the variance is going to just be market conditions but in general the weaker those numbers that's a pretty bad sign.
Comments
So I agree with the sentiment that marks are not useful however you can do an analysis of the "non-realized gains" and the age of each fund then compare that to benchmarks of other funds of the same year.
That's basically a backend way of figuring out how much of their returns are pie in the sky. One other thing to keep in mind to give a16z the benefit of the doubt is their funds are MASSIVE. Putting that amount of capital to work is hard- and relatively harder than Bessemer and the other funds they are compared to.
That said, the % of Fund III in particular that is non realized is fairly scary. I'd take a wager that it does not return capital. Note also A16z pretty quickly raised a new fund before a lot of these returns for 3 become clearer. That's just guessing on my part but I'd def bet III is not gonna be good. That said I still love a16z and the partners and their approach...I actually hope I'm dead wrong.
Just so I'm clear, the idea here is to look at all funds that started in the same year, average the non-realized gains, then compare that to the non-realized gains of the fund you're evaluating? How do you know whether the difference is how they mark vs. actual alpha?
Look at the funds a specific "vintage" year, then look at:
1) Realized Returns/ Total Size of Fund 2) compare above to prior vintage years of same partnership/ similar funds 3) Look at unrealized returns as a percentage for this vintage across funds and for same partnership for prior funds for same years out.
The bulk (like 80%) of unrealized gains can disappear in a quarter if you have a large market correction.
Some of the variance is going to just be market conditions but in general the weaker those numbers that's a pretty bad sign.