The actual deployment of risk has been shoved under the rug of ten-levels of embedded diversification, concealed by a plethora of legal documents.
In response to my article “As a Limited Partner I feel uninformed” a representative from a valuation firm makes the same mistake as many Limited Partners have made. And that is to trust the content of documents to represent the actual risk deployed in Venture Capital. Here is my response to such a suggestion:
Even then. The actual deployment of risk can be and has been shoved under the rug of these generic and non-specific documents. These documents are not only lacking in the definition of risk, but severely lack controls to allow you as an LP to measure their compliance. And that is exactly why risk has deflated to uniformity and thus subprime Venture Capital.
Our reply above is a response to the representative’s reply (posted in full below) based on the aforementioned article:
“You should be able to be informed with:
1. Copies of the Limited Partnership tax returns.
2. Copies of Financial Statements with assets Marked-to-Market.
3. Copies of Minutes of General Partner meetings.
I am not an attorney, but usually, General Partners have a fiduciary duty to provide at least these 3 items to Limited Partners. A review the Operating Agreement should provide information with the protocols for obtaining such info. Check how often you will receive these BEFORE making such an investment.”
