Walles

"Volatility Laundering": 

In the last 20 years, Venture Capital (VC) with the "help" of the regulator created a "perfect" volatility-controlled permission-only environment for companies to grow, and they stayed private for much longer before going public. By doing that, they managed:

1. to keep most of the hyper-growth phases to themselves and inflate the valuations that ended up in oversized IPOs 

2. drained the public markets and prevented most of the public from enjoying the returns of those hyper-growth companies.

The Private Equity (PE) also contribute to this "volatility laundering" and drainage. They are holding and growing fast the equity-like assets with substantial leverage, reporting changes in value based on internal DCF/Comparable companies while getting realistic valuations once in ten years when all the companies are sold. 

More wood to the volatility fire:  

1. the quantity of money in the system thanks to policymakers

2. the rise of the retail investor/trader and the access to trading platforms and derivatives 

More capital is chasing fewer public companies, which increases market volatility, even for blue-chip companies. 

Who benefits? 

VCs and PEs can achieve better than average equity returns with "minimized" volatility. 

Who pays the bill? 

1. The public can achieve less than average equity returns (drained growth component) with maximized volatility.   

2. The pension funds, endowments, (LP's) are exposed to more volatility in public markets for less than average 

   returns. At the same time, they have no clue about the actual volatility of the PE and VC allocation.