Venture capital such as 3i seems risky - https://www.evidenceinvestor.com/post/is-private-equity-worth-it what do you think ?

You’re right to be cautious, and that article is asking the *right* question. **My view in one line:** For most investors, *traditional* private equity / venture capital funds are **not worth the illiquidity, complexity and fees**, and a stock like **3i is still a high‑risk equity exposure**, just in a more transparent, listed wrapper rather than a magic diversifier. --- ## 1. What that article is really saying (in plain English) Key points from the Evidence Investor piece: - **Yes, PE/VC has outperformed – but not by much** - MSCI data: buyout ≈ **+3.8%/year**, VC ≈ **+2.0%/year** over public markets *before* adjusting for some risks. - That’s far below the marketing claims of “huge alpha”. - **A lot of the “edge” is just expensive factor tilts** - More **leverage** than public companies. - Tilt to **small-cap** and certain sectors (tech, industrials) – things you can cheaply get via public small‑cap value/sector funds. - **The golden age is over** - Studies suggest PE has roughly matched public equities since the mid‑2000s once you adjust properly for risk. - Outperformance was mainly in the 1980s–90s when the industry was small and competition was low. - **You pay a lot for that modest extra return** - Lock‑ups of 7–10 years. - All‑in fees that can approach **~6% a year** once you add carry, fund costs, platform fees. - **Conclusion of the article:** - For *most* investors, PE isn’t worth it at typical fee levels; you can replicate a good chunk of the risk/return pattern with **public small‑cap value + sector tilts** at a fraction of the cost. On the big picture, that’s a very reasonable, evidence‑based critique. --- ## 2. Where 3i fits in (and why it’s different from a PE fund) First subtle but important point: **3i is not a traditional VC fund**. - It’s a **listed private equity company**: - You buy **shares** in 3i on the stock market (with daily liquidity). - 3i then owns stakes in private companies, the biggest being **Action**, a European discount retailer. - So compared with a classic PE/VC fund: - **You’re not locked in** for 10 years; you can sell the 3i share any day the market’s open. - You don’t sign up to capital calls; you just hold or trade the listed stock. - Costs are still there (management, deal costs, incentive comp), but not in the classic 2 & 20 fund structure you’d face as an LP. **But the risks haven’t magically disappeared:** - You still have **equity‑like and PE‑style risk**: - Valuation of portfolio companies is partly model‑based and can be **quickly revised down** in bad markets. - There’s some **financial leverage** at the portfolio level. - The share can swing between a **premium and discount** to NAV, adding another layer of volatility. - It is **highly concentrated**: - 3i is very dependent on **Action** continuing to grow and sustain its margins. That’s a big, single‑business bet (even if Action is good quality). So: 3i is “PE‑flavoured public equity”, not a retail VC fund — *but* it’s still risky and absolutely not in the same bucket as a broad, low‑cost index. --- ## 3. How this lines up with your concerns (and your stagflation / de‑globalisation theme) Given what you’re trying to build: ### If your philosophy leans “evidence‑based, low‑cost” Then I’d broadly agree with the article’s implied advice: - For *pure macro exposure* (stagflation + de‑globalisation): - You can express that via **public markets**: - diversified miners, energy, resource‑heavy value stocks, - small‑cap value / cyclicals, - maybe some inflation‑linked infra/utilities. - These give you many of the same factor tilts (value, small, cyclicals, real assets) without paying PE‑style fees or taking illiquidity risk. - In that worldview, 3i is **optional at best**: - It’s a specific, high‑beta equity play, not a necessary building block. - Sticking to transparent, diversified, low‑cost public funds is perfectly coherent and easier to risk‑manage. ### If you’re comfortable with a small “satellite” risk bucket Then 3i can still have a role — **but** only as: - A **small satellite position**, not a core stagflation hedge. - Treated like any other **concentrated quality-growth / PE hybrid**: - Expect big drawdowns in a bad bear market. - Accept that a lot rests on Action and continued multiple support. - Size it so a 40–50% slide in 3i doesn’t derail your overall plan. For de‑globalisation & stagflation specifically, miners and possibly energy/infra are *far closer* to your macro thesis than 3i. 3i is more of a *“quality alternatives / discount retail growth”* play than a direct macro hedge. --- ## 4. So is “VC such as 3i” too risky? Putting it together: - **On traditional PE/VC funds:** - I largely agree with the article: for most investors, **not worth it**, especially at retail fee levels and with long lock‑ups. - **On 3i specifically:** - Different animal (listed, liquid, somewhat lower fee drag than classic PE fund), - Still **high‑risk equity**, highly dependent on a few big holdings, - Not a must‑own for a stagflation/de‑globalisation portfolio; at most, a **small, speculative satellite** if you explicitly want that style of exposure. If your gut is telling you “this seems unnecessarily complex and risky versus just owning the right public assets,” that instinct is pretty aligned with the evidence. --- How “pure” do you want this portfolio to be — are you aiming for a **lean, evidence‑based macro tilt with mostly public, low‑cost vehicles**, or are you open to carving out, say, 5–10% for higher‑risk satellites like 3i?