Why LPs tend to underestimate risk
LP risk and marketing tactics
Welcome back and happy Sunday!
Over the years, I’ve noticed a very clear trend where LPs underestimate risk in LP positions.
Today, I’d like to explore why I think this trend is prevalent and why its assumptions are flawed.
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First, let’s get the basics out of the way.
It’s healthy to look at your upside (otherwise you’d never consider investing), but the downside needs to be carefully vetted.
This is particularly true in real estate estate investments where the upside is nothing like venture capital and loss of capital lasts far more than you think.
Here’s my thesis: