Silicon Valley Bank collapse: Zerodha's Nikhil Kamath slams PE/VC firms, says they were 'deluded'

Zerodha co-founder and investor Nikhil Kamath has said that the Silicon Valley Bank collapse is a testament to how deluded the private equity and venture capital (PE/VC) world became during the low-interest rates cycle. Kamath also said that private equity and venture capital (PE/VC) has replaced real estate in his worst investments list for 2023. The Zerodha co-founder’s worst investments list comprised PE/VC, real estate especially commercial, equity market, commodities apart from diamonds, and short-tenure fixed income. 

Kamath said in a now-deleted tweet, “SVB is also a testament to how deluded the private equity/VC world had gotten, replaced real estate in my worst to okay invest list of 2023. (a) PE/VC; (b) Real estate (especially commercial); (c) equity markets; (d) commodities (not diamonds); (e) short tenure fixed income (risk free, no mtm, etc.)”

He further stated, “The simpler a product is to understand, the better it is. If anyone sells “unnecessary” complexity, run. A higher interest rate cycle vs what we have witnessed in the last decade are two completely different things, different (sic)...” 

Kamath’s tweet comes in the midst when global financial stocks have lost around $465 billion in market value due to the collapse of the Silicon Valley Bank, which was shuttered down by the regulators on Monday. As per Bloomberg, the combined m-cap of the MSCI World Financials Index and MCI EM Financial Index fell about $465 billion in three days. Japan’s Mitsubishi UFJ Financial Group fell 8.3 per cent, South Korea’s Hana Financial Group Inc dropped 4.7 per cent, and Australia’s ANZ Group Holdings plummeted 2.8 per cent. 

Meanwhile, rating agency Moody’s has also put six other US banks under review for rating downgrade given the Silicon Valley Bank crash. These banks are First Republic, Western Alliance Bancorp, Intrust Financial Corp, UMB Financial Corp, Zions Bancorp and Comerica Inc. Moody’s is concerned about the lenders’ reliance on unsecured deposit funding and unrealised losses in asset portfolios.

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