Thematics Venture Vision Allocation Tailwinds-110267115

M Global FoundationThematicsVenture Vision: Allocation TailwindsMorgan Stanley & Co. International plc+Edward StanleyEquity Strategist Edward.Stanley@morganstanley.com +44 20 7425-0840 Matias OvrumEquity Strategist Matias.Ovrum@morganstanley.com +44 20 7425-9902 Our Venture Vision weeklies look at (1) early-stage cross-theme funding patterns; (2) relative valuations between themes; (3) public versus private valuations; and (4) the resulting anomalies within certain themes. Please let us know if you would like our excel database of >50,000 VC deals categorised by theme, country, value and date. We also send this file as a weekly distribution if you would like to receive it regularly. See here for our global market synopsis. See here for our longer analysis on the state of the VC market, particularly as it relates to non-US Venture and innovation acceleration. US Endowments increased their alternatives allocation from 5% to 50% since 1990. US Public Pension funds lag this allocation by half but control nearly 7x the AUM. If they matched endowments' allocation, an incremental $1.3trn would shift to alternatives, likely at the expense of public equities.Yale's endowment fund led the way in alternative asset allocation. This has been re-enforced by a long-term trend of portfolio decisions from allocators accounting for ~$850bn of AUM. Since 1990, US endowments increased their allocation to alternatives from ~5% to ~50% by the end of 2019. Public pensions managers have lagged in their allocation, moving from ~5% in 1990 to ~28% by 2019. However, this group accounts for nearly 7x the assets. Nonetheless, both have shown remarkable durability in driving the alternative asset theme frequently highlighted by our global financials teams.Exhibit 1:Asset Allocation by US EndowmentsUS Endowments Asset AllocationUS Public Pension Plans Asset Allocation0%10%20%30%40%50%60%70%80%90%100%199019921994199619982000200220042006200820102012201420162018Endowment Asset AllocationAlternative AssetsPublic EquitiesFixed Income and Cash0%10%20%30%40%50%60%70%80%90%100%199019921994199619982000200220042006200820102012201420162018Public Pnesion Asset AllocationAlternative AssetsPublic EquitiesFixed Income and CashSource: Counterpoint Global, Morgan Stanley ResearchThe major difference between the two groups is their relative preferences for public equities in the balance of their allocations. Endowments have seen public equity allocations fall 18% points to 36% of their books. By contrast, the rise in alternatives for public pension plans has come at the cost of fixed income. For public pensions, the portion of public equities is at a similar level now to 1990 at around 48%.Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan