Some institutional LPs have started to pull out of VC, but most won't

This year will likely be a sore point for venture capital returns. While we haven't seen any drastic declines or sensational startup shutdowns yet, if the market continues on its downward trend, it seems almost inevitable.

While some companies may ignore a bad vintage or two - thank you, management fees - poor performance hits their investors (limited partners or LPs) the hardest. But despite the fairly certain future performance, institutional LPs like to play the long game of investing. For this reason, they are generally not very responsive.

So I was surprised to see that the Fairfax County Employee Retirement System told Insider in May that it was pausing new corporate relationships — while continuing to invest in crypto - while the New York State Teachers' Retirement System voted in August. reduce their venture capital allocation by five percentage points for next year.

The pair of news made me curious whether this particular downturn was in fact enough to steer LPs away from their historical investment standards, but according to LP consultants, these two venture capitalists are most likely outliers. Consultants said that even if things get worse before they get better, LPs have more reason than not to stay the course.