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Joe Lonsdale discusses why he has most of his personal wealth in VC and PE to achieve high-growth outcomes.
Key Takeaways
- Joe Lonsdale, founder of Palantir, Addepar, OpenGov, Resilience Bio and top-performing VC firm 8VC discusses why his family office holds large positions in high-growth private assets.
- Lonsdale holds most of his personal wealth in VC funds (including early stage) and private equity, with a small allocation to liquid markets, to achieve long-term high growth outcomes.
- These private assets offer very high returns, some volatility dampening, and importantly, exposure to the most exciting and disruptive forces in the economy.
Transcript
I'm Joe Lonsdale. I’m the founder of Palantir, Addepar, Resilience Bio, and other technology companies, and I'm the founder of LIT. I also lead 8VC.
For my personal family office, I have a very high-growth, impact-oriented framework. I like being involved in the sectors of the economy that are helping transform the world and fix industries in a positive way. Whether you're talking about saving lives with a revolution in biology or they're talking about a lot of what's going on in the technology world and in the world to fix industries.
Usually, I use venture capital firms, especially my own, where most of my money is, as well as private equity firms to access high-growth companies. We also do a lot of small venture capital early-stage funds that my friends have built to get access to the very earliest companies. And then, you know, sometimes we'll use some public markets as well to stay in companies we really believe in after they go public or even to invest in companies when they go public that we're bullish on. And I think it's good to keep some of your portfolio liquid. The majority of my portfolio is illiquid in these high-growth alternative areas.
So, the question of, how do private assets impact my portfolio? They let me have impact on a lot more exciting areas. There's some arguments that they lower volatility. Some of the volatility is just not reported on a day-to-day like they are on public markets. But I think the point is that these are the only way to access the highest return areas in the world. And the only way to be part of the industries that are building the future in the most aggressive ways.
A lot of people ask, Are these private markets actually uncorrelated? And the answer is some of them are. And some of them are pretty correlated. There's a lot of parts of the venture capital world where you're betting on the innovation going on within biotech and biology areas. You're betting on the innovation going on within health care, within finance, within logistics, and the innovation going on those areas. It's going to be somewhat correlated to the size of those industries. If those industries get wiped out by bad regulation or by a huge recession, you're going to get hit too. At the same time, it's very possible when those industries don't even grow very much, then to change their processes, and for the venture capital, or even the really best private equity in those industries to still make a lot of money relative to the economy as a whole, because you're fixing these places and you're making them work better. So, increased access to private markets drives up returns, increases diversification, and gives you access to the most innovative parts of the economy.
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