Thesis behind crossover investing

Crossover investing involves investing across both public and private markets, typically within the same fund. The strategy is designed to offer LPs a unique value proposition by leveraging insights and opportunities from both domains. Here's the thesis behind it:

1. Access to Growth Across Stages: Crossover funds can invest in private companies during their growth phase and continue to hold them post-IPO. This allows them to capture value from both the private and public market growth trajectories.

2. Information Edge: By being active in both markets, crossover investors can gain a deeper understanding of industry trends, competitive dynamics, and company-specific insights. This can lead to better investment decisions and potentially excess returns.

3. Flexibility in Capital Deployment: Crossover funds can allocate capital dynamically between private and public markets based on where they see the best opportunities, offering a more flexible approach compared to traditional funds.

4. Attractive to LPs: LPs benefit from a diversified exposure to both private and public markets within a single fund, potentially reducing the need to allocate separately to VC/PE and public equity managers.

While the strategy has faced challenges recently, as you mentioned, this is often attributed to poor execution or lack of discipline rather than a fundamental flaw in the approach. For example, overpaying for private investments or failing to adapt to changing market conditions can erode returns. However, when executed well, crossover investing can provide a compelling risk-return profile for LPs.

Sources: Troubled fundraising processes, Differences between Co-invest and Secondaries?, PE professional, what's your process while judging an investment?, Which investing strategy will be most challenged this decade (‘20 through ‘29)?, https://www.wallstreetoasis.com/forums/the-only-post-about-active-investing-you-will-ever-need-to-read?customgpt=1