EAs currently invest all their money in public equities, and none in startups. (The latter is obviously false, but it’s also sort of true: on the margin, earners-to-give can consider working for startups that don’t already have any EAs working for them. That set of startups has 0% EA investment.)
My understanding of the EA portfolio is that it is currently heavily invested in crypto, FTX, Facebook stock, and Asana stock. Does that change the expected returns? More importantly, does that change the correlations? I imagine a lot of tech startups of the kinds EAs might join likely have especially positive correlations with this part of the portfolio.
In fact, it might be interesting for more EAs to find start ups that are negatively correlated with these (e.g., an Asana competitor).
In fact, it might be interesting for more EAs to find start ups that are negatively correlated with these (e.g., an Asana competitor).
My intuition is that this will be positively rather than negatively correlated fwiw, in the same way that I don’t think “make a different crypto exchange” is a good way to hedge against FTX risk.
Yeah I agree there are likely a lot of sector-based correlations where Asana and its competitors move together in response to broader outlooks about the sector.
Yes this is something worth considering. I did look at how much alpha the Cambridge Associates startup data had on top of US publicly-traded tech stocks vs. the US total market, and there wasn’t much difference. EA money is in much more specific investments than just the tech sector, but that makes it harder to test the correlation.
Great and thorough analysis. Very cool!
One question:
My understanding of the EA portfolio is that it is currently heavily invested in crypto, FTX, Facebook stock, and Asana stock. Does that change the expected returns? More importantly, does that change the correlations? I imagine a lot of tech startups of the kinds EAs might join likely have especially positive correlations with this part of the portfolio.
In fact, it might be interesting for more EAs to find start ups that are negatively correlated with these (e.g., an Asana competitor).
My intuition is that this will be positively rather than negatively correlated fwiw, in the same way that I don’t think “make a different crypto exchange” is a good way to hedge against FTX risk.
There might be other ideas in this space however.
Yeah I agree there are likely a lot of sector-based correlations where Asana and its competitors move together in response to broader outlooks about the sector.
Yes this is something worth considering. I did look at how much alpha the Cambridge Associates startup data had on top of US publicly-traded tech stocks vs. the US total market, and there wasn’t much difference. EA money is in much more specific investments than just the tech sector, but that makes it harder to test the correlation.