search query: @journal_id 73 / total: 1728
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| Author: | Checkley, M.S. |
| Title: | Inadvertent systemic risk in financial networks: venture capital and institutional funds |
| Journal: | Long Range Planning
2009 : JUN, VOL. 42:3, p. 341-358 |
| Index terms: | risk management networks venture capital funds investment |
| Language: | eng |
| Abstract: | It has been thought that the institutional funds investing in Venture Capital firms (hereafter as VCs) can diversify their financial portfolio risk by investing in several VCs. The adverse scenario, however, remains that an institutional fund invests in more than one VC, which chooses, via syndication, to invest in the same venture. This creates less diversification than expected, the result being inadvertent systemic risk for institutional fund. The study develops a random sampling model to explore this network scenario; encompassing both the source and destination of VCs' funds. A data set of 20 UK-based VCs and 73 institutional funds, making 218 investments in VCs in the period 1993-2003 is used as a source of data. The findings reveal the view that institutional funds investing in multiple VCs tend to do so such that risk is minimised via diversification; the observed pattern of relationships is worse-than-random. Thus, risk in investment networks can be materially higher than any standard portfolio analysis would show. |
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