It’s actually not just large fund of funds like CalPERS.
Andy Manoske
1

I’ve spent a lot of time on this topic this summer. Bottom line is the numbers are much uglier than presented here. About 40% of companies go to zero/zilch/nada. Another 30% return 0–2x. <5% of invested dollars return >10x, and those dollars need to hit ~30x in order to meet the 3x gross threshold. Two interesting takeaways:

  1. There are some General Partners whose investment record looks nothing like the above; instead, 10–20% of their invested capital returns >10x and 20–40% is in the 5–10x range; these are >>5x investors (lifetime!). I’ll post about this down the road because it is truly contradictory to many fund of funds investment strategies and conventional venture thinking in general.
  2. Smaller funds don’t have enough shots on goal to guarantee 3x gross, so if you’re an LP investing in smaller funds, you must either have a multi-fund investment strategy or you must believe that there’s something special about your GPs (back to point #1).

So I agree with the overall premise of this post; at a high level, venture is a spray and pray game with larger funds spraying with larger hoses. But if you look closely enough at individual funds and individual investors, you’ll find that some disobey the typical power law returns distribution and if I was an LP, those are probably the funds that offer a better venture returns/risk ratio.