The denominator effect

Some of the largest public pension funds, crushed by losses in the public equity markets, are being forced to either reassess how they allocate their investments or rebalance their portfolios in order to maintain mandated target allocations between asset classes, a process known as the "denominator effect."

Although VCs and some key pension funds have publicly said they expect existing capital commitments will be honored, rumors of asset dumping on the secondary market for unquoted investments, the exposure of limited partners to highly leveraged private equity investments, and suggestions that capital calls might be delayed, are raising concerns about access to capital that VCs normally would consider locked up...