RECOMMENDED READING
Coin-Flip Capitalism
Coin-Flip Capitalism: A Primer
Confronting Coin-Flip Capitalism

New research from American Compass indicates that, despite posting profitable returns in the wake of the COVID-19 pandemic, the leveraged-buyout private equity and venture capital industries have since faltered, providing returns comparable to public markets.

In 2020, American Compass launched “Coin-Flip Capitalism,” to explore the performance of the hedge fund, private equity, and venture capital industries and the implications for public policy. This analysis made clear that these funds rarely overperform the market, instead “generating the results that one might expect from an elaborate game of chance—placing bets in the market with odds similar to a coin flip.”

Today’s updated analysis of returns data finds that the turbulence of the post-pandemic period has largely settled, and performance in these industries has declined:

  • While private equity experienced one of its best years in 2021, deal activity has stalled through 2023 and 2024, with fundraising reaching a 10-year low and deal values tumbling.
  • The story for venture capital is similar, with the NASDAQ’s 10-year rolling return beating venture capital’s as of Q1 2024.
  • Hedge funds have been even more lackluster, consistently returning yields below index fund benchmarks even before 2021.

Click here to read the full Q2 2024 update, and read the full Coin-Flip Capitalism collection.

Recommended Reading
Coin-Flip Capitalism

Coin-Flip Capitalism aims to help policymakers and the public better understand how the hedge fund, private equity, and venture capital industries function, what social and economic value they create or destroy, and how policy should respond.

Coin-Flip Capitalism: A Primer

An overview of the hedge fund, private equity, and venture capital industries and the implications of their recent performance.

Confronting Coin-Flip Capitalism

This paper presents the case for policymakers who favor free markets and appreciate the value of a well-functioning financial system to reform the rules governing that system.