Brad Young calls himself an old guy when asked his age (he’s all of 44). But Young, partner and head of North America operations for London-based investment advisory firm
Before joining Altius four years ago, he was the director of private equity at the Massachusetts Institute of Technology for a year; before that, he was in charge of the University of Richmond’s domestic private equity portfolio for about five years.
Young currently spearheads the VC efforts of Altius, whose clients include the California State Teachers’ Retirement System, the Teacher Retirement System of Texas, the Employees Retirement System of Texas, and the Maryland State Retirement and Pension System.
In between meetings at his Richmond, Va., office, Young talked about LPs and their views on venture capital with PE Week Senior Editor Constance Loizos.
Q: What is the most common concern about venture capital that you hear from institutional investors?
A: That it’s just very hard to render judgment on VC firms that either have no track record, or a track record that’s not very strong for the last five to 10 years. And let’s face it, you’re looking at a period of bad returns right now.
Q: What sectors do you tell your clients to avoid?
A: I don’t specifically warn them about sectors, though I do have concerns about cleantech because of the amount of money being deployed there and the number of people with no track record in the industry.
Renewable energy is something that interests me, but not at the early stage level. What interests me would really depend on what the group’s track record is.
At the same time, I’m not going to say that something is not a viable opportunity. I can’t generically say: ‘Stay away from the Internet.’
Q: Has the credit crunch impacted how much LPs are allocating to venture firms?
A: No, not at all. No one is saying: ‘We can’t deploy our money in buyout markets, maybe we should turn to VC.’ There’s been no effect on LP cash flows into venture that I’ve seen, not within our client base.
Q: There’s a lot of money flowing to the venture industry, though. Last year, VC firms raised about $35 billion, the highest level since 2001.
A: My sense is that there’s more of an equilibrium in the venture market right now, and that it’s just smaller than the buyout market. I doubt you’ll see the money raised double, or conversely, drop to $15 billion. I think people who are philosophically comfortable with venture are already there.
Q: What’s the most important lesson you learned when you were a limited partner?
A: That tere’s no way to make a good decision without meeting a lot of managers and calibrating to the universe they inhabit. A lot of people will meet a quarter of the universe and think they know what a ‘Grade-A’ manager is, and I think that’s probably one of the biggest mistakes people make.