Limited Partners should resist pressuring VCs for early exits to lock in DPI. The best companies compound value at incredible rates, making it optimal to hold winners. Instead, LPs should manage portfolio duration and liquidity by building a balanced portfolio of early-stage, growth, and secondary fund investments.

A fund showing a 7x return on paper is already a massive success. The logical move is to sell positions and realize those gains for LPs. The tendency to "go for it" reveals a flawed incentive structure that prioritizes future potential over locking in exceptional returns.

Even with big wins, a venture portfolio can fail if not constructed properly. The relative size of your investments is often more critical than picking individual winners, as correctly sized successful investments must be large enough to overcome the inevitable losers in the portfolio.

The firm found that positions growing beyond 8% of the portfolio did not add enough value to justify the increased concentration risk. This disciplined approach prevents overconfidence in single ideas from jeopardizing overall fund performance.

In response to skyrocketing seed valuations, VCs are shifting their portfolio construction models. Instead of targeting a specific ownership percentage, the key decision is now what percentage of the total fund to deploy into a single deal. The focus has moved from ownership to the magnitude of the bet relative to the fund size.

To manage over-allocation from giants like SpaceX, LPs recategorize them from "venture" to a "quasi-public" or general equity bucket. This acknowledges their different risk profile and allows LPs to continue investing in new early-stage funds without breaching portfolio targets.

The primary risk to a VC fund's performance isn't its absolute size but rather a dramatic increase (e.g., doubling) from one fund to the next. This forces firms to change their strategy and write larger checks than their conviction muscle is built for.

Upon arrival, Chilton found over 30% of the endowment in one balanced manager's SMA of large-cap stocks. This high concentration, initially a concern, turned into an "incredible liquidity gift" during the 2008 crisis, enabling the college to meet its obligations.

To meet its 60% budget support obligation without holding excess cash, the Williams endowment obsesses over liquidity. Weekly cash flow reviews and credit lines allow them to keep only 1-2% in cash, ensuring the vast majority of the portfolio is always in the market and compounding.