Investors have been navigating challenging financial markets for the past several years. From stocks to bonds, asset classes have been impacted by high inflation, rising interest rates, and the lingering effects of the pandemic. But were venture capital and private debt investments the exception?
Chris Prestigiacomo oversees the State of Wisconsin Investment Board’s Venture Capital and Private Debt portfolios. He says the investment opportunities for both portfolios remain strong.
“Despite the rollercoaster ride the financial markets have been on the past couple of years, we continue to see investment opportunities for both portfolios,” Prestigiacomo said. “I am encouraged by what I am seeing across the country and particularly in Wisconsin.”
Although investments overall have not rebounded to pre-pandemic levels, Prestigiacomo said the number of dollars committed to private debt continues to climb because of demand from companies wanting to access capital and investors looking for higher returns.
“There is demand, but I think credit will continue to tighten up,” he said. “Banks are probably not going to lend as much as they have been over the past couple years. We go through these cycles periodically and it's during these times where non-traditional lenders like SWIB will be able to step in and fill a void to lend money to strong businesses.”
Venture capital investments, specifically in Wisconsin, are also trending in the right direction, according to Prestigiacomo.
“If you look at it over the past five to ten years, you'll see that capital invested in the Midwest is increasing,” Prestigiacomo said. “While we went through a pretty horrible period during the pandemic, one of the positives that came out of it, in particular around venture capital, was managers became more comfortable investing remotely, really leveraging their networks across the country to find great entrepreneurs and great companies. As a result, capital is flowing into underserved and undercapitalized markets and over time, we think the trends are moving in the right direction.”
Prestigiacomo said that even with the challenges of the past several years the fully funded status of the WRS gives SWIB an advantage when making investment decisions.
“We are able to invest for the long term and not make short-term, drastic decisions to sell assets to raise liquidity,” he said. “Having liquidity in challenging markets allows us to invest and take advantage of investment opportunities that others, whether it is other pension funds, endowments, or foundations, are exiting because they don’t have the capital to put to work. We have the flexibility to make investments at deep discounts which helps generate long-term, solid investment returns.”
You can learn more about SWIB’s venture capital and private debt portfolios by listening to episode 22 of The SWIB Podcast. You can also read SWIB’s Goals for Investing in Wisconsin report by visiting by visiting www.swib.state.wi.us/publications.