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Towards a risk model of venture capital funds: liquidity and performance forecasting

The European venture capital market is younger than its US counterpart. Following the boom of the 1990s there is a definite need for it to mature, argues Tom Weidig of the European Investment Fund. For it to do so, the market must improve its understanding of risk management and pricing techniques.

Weidig proposes a risk management scheme that will allow a fund of funds investor or institutional investor to both assess performance and plan liquidity.

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Copyright © 2003 EIF

The EIF is a financial institution based in Luxembourg and owned by the European Investment Bank (60.75% of the share capital since June 2000), the European Commission (30%) and around 28 European banks and financial institutions (9.25%). The Fund is the EIB Group's specialised financial institution providing venture capital and guarantee instruments for the creation, growth and development of Small and Medium-sized Enterprises, in both the EU and in the Candidate Countries. Further information on EIF activities is available from its website at www.eif.org

Dr Tom Weidig holds a Master of Science degree in Theoretical Physics from Imperial College London. His PhD thesis at the Centre for Particle Theory, University of Durham, was on 'Classical and Quantum Aspects of Solitons'. He was a postdoctoral researcher at the University of Manchester, and a visiting researcher at Trinity College and DAMTP, University of Cambridge. Leaving physics research behind, he since worked as a risk analyst in derivatives for Bear Stearns in London, and is now developing and implementing a risk model for venture capital funds at the European Investment Fund in Luxembourg via his company QuantExperts.