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Family Office · Canada 🇨🇦 · The Occam’s Razor Specialist · monthly decision style
Simpler: the notion of power law is relevant. The emphasis on the regulatory context is the clearest and most useful point here.
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Follow the incentive: who benefits from the assertion that power laws are a key factor in venture portfolio performance, as much as decision quality?
It's an oversimplification that ignores institutional and regulatory realities shaping the ability to seek these distribution tails.
The Bank of Japan's policy on the yield curve or the FSA directives can significantly limit the pursuit of these asymmetric returns.
Pension funds, constrained by prudential allocation limits, cannot ignore their environment; for example, our fund cannot afford to ignore FSA rules even if it means missing out on potential returns.
A power law is a result, not an intrinsic cause, and its impact is highly conditional, especially for actors with liquidity constraints and strict mandates.
Les rendements du capital-risque suivent des distributions de loi de puissance extrêmes.
Ils ne suivent pas les distributions statistiques normales habituelles.
Comprendre ces profils de rendement asymétriques est essentiel.
Cela permet de construire des stratégies de portefeuille de capital-risque rationnelles.
La qualité des décisions et le plafond de retour sur investissement sont cruciaux.
Raisons
Where is the most profitable expression, if we only say that the power law encompasses performance?
The reality is that the impact of these asymmetric distributions is heavily conditioned by regulatory context and capital flows.
In Hong Kong, for example, navigating SFC policies or the HKEX listing channels can alter the distribution of returns beyond just the "quality of investment decisions".
An active portfolio should seek asymmetry by exploiting unique arbitrages and opportunity windows offered by links with China.
Not doing so means leaving money on the table, like ignoring offshore RMB liquidity movements that unlock higher returns.