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To: GST who wrote (143138)	6/18/2002 8:44:53 PM
From: Oeconomicus	Read Replies (1) \| Respond to of 164684

GST, there are many kinds of risk in investing. Yes, many VC funds are fairly concentrated in specific sectors (biotech, communications technologies, software, etc.), but the "correlation" you note has to do with market risk while VCs should be focused on more specific business risks like the feasibility of a new technology, the potential for competing technologies, market acceptance of a new product or service, the likelihood of the entire management team getting run over by a beer truck while walking back from lunch, and various other risks of executing the business plan of a specific venture. These risks can be managed, in part, by investing in a number of opportunities within whatever sector(s) is(are) the fund's speciality. Anyone investing in a VC fund would be foolish to think that this investment alone represents a diversified portfolio. I doubt many think that, BTW. Bob PS: Most assets of the typical VC fund are not publicly traded securities, so there are no stock prices to correlate. Public market conditions affect the liquidity of the funds (their ability to cash out when they might want to) and the managers ability to raise new money for new ventures, but the relationship between near-term market conditions and the long-term returns on the fund's investments is rather indirect. On might even argue that the long-term value of already funded ventures is enhanced by the lack of capital available to new, potentially competing ventures.