Ideosphere Forum

fx-discuss: Re: $CYC

Author: Shawn M. Winnie
Conversation: fx-discuss: Re: $CYC ( prev | next ) reply!
Topic: fx-discuss ( prev | next )
In-Reply-To: Neal Gafter's post
Followed-Up-By: Neal Gafter's post
Date: Mon May 19, 1997 12:54 pm

Shawn M. Winnie
Neal Gafter



Neal Gafter wrote:
> What portion of the capital in a fund do you require to be
> invested in "start-ups" for the fund to be considered a SUHF?
I'm not prepared to answer this with a number. If a fund's
prospectus indicates that it intends to invest in newly formed
entities formed to flourish in a deflationary environment, I'll
likely count it. (This is less restrictive than it might
appear, as funds in most of the western world are required to
describe their investment mandate in their prospectus.) The
above is formally neither a sufficient nor a necessary
condidtion.

> Is a company considered a start-up simply by virtue of its stock
> being newly offered to the public? If so, how long after
> its initial public offering is it still considered a "start-up"?
> 2 years? 5 years? If that's not the criteria, what is the
> definition of a start-up? Is it a company that was incorporated
> less than 2 years ago? If so, would this include re-incorporation
> under a different name and jurisdiction?
Primary distributions (public offerings in the US, flotations in
the UK, etc.) are irrelevant for purposes of $CYC. I intend to
define start-up the way the venture capital community does -
subjectively. Part of the (squishy) definition of start-up is
that a firm have no more than one round of financial equity
investment. This would require the fund to make founding ("seed")
investments. There are exceptions.

> Is it sufficient to find a single such fund that outperforms the
> relevant indices for the claim to be judged true? Does it have to
> be the same fund for each of those seven out of ten years, or can
> it be a different start-up-hedged fund that outperforms the indices
> in each of those seven years?
It is sufficient to find a single such fund. The cash-on-cash IRR
of that fund must be greater than that of the relevant index or
indices in seven of the ten years 2001-2010. I am not yet sure
how I will handle successive iterations of funds with limited,
or overlapping, lifetimes.

> Can you name one single start-up-hedged fund?
Off the top of my head, no. Not one that seems to fit Michael's
description. OTOH, that shouldn't be surprising, since the author
postulates macroeconomic conditions which do not now exist. There
might well be a seed-stage VC focused on retail out there who is
doing this right now...I just don't know of any.

Frankly, this latter point is part of the problem in responding to
the earlier questions in a concrete form. If the conditions which
the author predicts come to pass, we will know more about the form
of the investment vehicles which arise in response to those
conditions. More concrete language is not warranted at this time.
--
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* Shawn M. Winnie - Shott Capital Management (617) 776-2963 (Home) *
* (617) 790-2927 (@SCM) *
* This message should not be construed as (617) 790-2982 ( Fax) *
* representing the position or opinion of *
* Shott Capital Management (SCM). *
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