As investors, we’re presented with lots of compelling reasons to commit to a fund. One line LPs consistently hear is that they should invest with a particular general partner because it protects the downside better than anyone else does. But, something we’ve been pondering, does this downside protection matter? Do we need it when investing in the private markets?
To look into this, Hamilton Lane did an analysis of up and down markets from 1995 to 2015. It made reasonable assumptions about what constituted up and down in terms of return thresholds to eliminate flat or average markets in the context of private market returns.