Remove the veneer: claiming that power law returns encompass the performance of a venture capital portfolio is an oversimplification that ignores operational realities.
The quality of decisions is certainly crucial, but liquidity constraints and ESG mandates for funds like ours in Denmark can turn a theoretical distribution into mediocre returns.
We cannot always participate in the most promising funding rounds or hold illiquid investments indefinitely.
The example is clear: a pension fund's inability to sell an illiquid stake in a startup before a regulatory mandate expires makes pure power law potential returns purely academic.
It is necessary to prove that this truly changes the cash flows under our constraints.