March 29, 2023

Japan Keeps Monetary Policy Steady

In a unanimous vote, the bank’s board stuck to its strategy of expanding the monetary base at an annual pace of 60 trillion yen to 70 trillion yen, or $585 billion to $682 billion, through purchases of government bonds, commercial debt and other assets. Those moves pump money into the economy.

After the central bank’s meeting last month, it unleashed what analysts have dubbed a “shock-and-awe” monetary policy, a sea change for a bank that had come to be known in recent years for its caution and conservatism.

Under its new governor, Haruhiko Kuroda, the Bank of Japan has gone all-out to fight deflation. Declaring he would do “whatever it takes” to combat falling prices, Mr. Kuroda last month announced that the bank would seek to double Japan’s monetary base, as well as the bank’s holdings of Japanese government bonds, by the end of 2014. The aim of such a policy is to keep interest rates low, prompting consumers to spend and businesses to invest in growth and jobs.

In recent days, however, worries have grown about rising interest rates in the government bond market, which could threaten Japan’s monetary policy. Japan is vulnerable to rising borrowing costs because of its high public debt, which is twice the size of its economy. Bonds are also the main financial asset held by banks, pension funds and insurance companies, making a surge in debt yields perilous.The biggest concern for the central bank is volitility in the bond barket, where yeilds are still above levels marked befor its meeting last month, Cameron Umetsu, a strategist at UBS, said in a note published ahead the decision Wednesday.

“This can be viewed as one of the ‘unintended effects,’ which, if sustained, could dilute the effectiveness of the new quantitative and qualitative easing framework,” he said.

The scale of Japan’s quantitative easing is striking. Assuming that the Japanese economy grows by 2 percent a year, the Bank of Japan would expand its assets to just under 60 percent of the country’s gross domestic product, according to estimates from CLSA Asia-Pacific Markets. The U.S. Federal Reserve’s assets, which now total about 20 percent of the U.S. economy, and the European Central Bank’s assets, which come to about 28 percent of the euro zone’s G.D.P., pale in comparison.

Japan stands out in another important way. Under Prime Minister Shinzo Abe, who took office in December and has been the main champion of the bank’s new audacity, Japan is coupling its monetary push with heavy government spending, contrary to calls for austerity in the United States and Europe.

But in Japan, such calls have largely fallen on deaf ears; hardly two months into office, Mr. Abe pushed through an emergency stimulus package to the tune of 10 trillion yen, and the National Diet, the Japanese parliament, is expected to pass a whopping initial 92.6 trillion yen budget for 2013, with heavy spending on public works.

By contrast, the Fed and E.C.B. have been forced to depend on monetary policy alone to stave off stagnation and bring about an economic recovery. In both the United States and Europe, a significant increase in government spending remains too politically controversial.

That is not the case in Japan, where Mr. Abe’s ruling Liberal Democratic Party enjoys a solid majority in parliament’s powerful lower house, and appears set to ride sky-high opinion polls to victory in summer elections for the upper house.

Still, critics have pointed to Japan’s skyrocketing public debt as proof that such spending is hardly sustainable. Japan’s latest spending packages, they say, will be the final push that could send Japan plummeting into a Europe-like debt crisis, but of even bigger proportions.

Defenders of the bank’s monetary policy had argued that Japan’s bold stimulus efforts would not push interest rates higher, because the central bank promises to buy bonds the government issues.

But in recent days, yields have been volatile, with the key 10-year nominal government bond yield hitting five-year highs last week before later settling down. Traders blamed the central bank’s purchases for creating a lack of liquidity in bond markets.

Still, some analysts say the spike merely reflects healthy inflation expectations.

The Bank of Japan “learned is that it is not easy” to control market expectations, Masaaki Kanno, chief economist at JPMorgan Securities Japan, said in a research note.

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Voters Tighten Limits on Executive Pay in Switzerland

The vote gives shareholders of companies listed in Switzerland a binding say on the overall pay packages for executives and directors. Pension funds holding shares in a company would be obligated to take part in votes on compensation packages.

In addition, companies would no longer be allowed to give bonuses to executives joining or leaving the business, or to executives when their company was taken over. Violations could result in fines equal to up to six years of salary and a prison sentence of up to three years.

The outcome of the referendum was a triumph for Thomas Minder, an entrepreneur and member of the Swiss Parliament (no relation to the reporter), who turned a personal fight against the management of Swissair, the flagship airline that collapsed in 2001, into a nationwide referendum against “rip-off merchants.”

Almost 68 percent of Swiss voters backed Mr. Minder’s proposals, according to results announced late Sunday.

“I am very proud of the Swiss people who have sent a very strong signal to the establishment,” Mr. Minder told Swiss television. Despite the fact that his referendum had been opposed by Switzerland’s main political parties, Mr. Minder, who is an independent member of the Swiss Parliament, called on all lawmakers to cooperate in swiftly enacting the law.

Nonbinding shareholder votes on executive pay have also been introduced in countries like the United States and Germany in response to Occupy Wall Street and other movements that have attacked the corporate excesses and abuses that fueled the world financial crisis. On Thursday, the European Parliament agreed to limit bonuses of bankers to two times their salaries.

In the case of Switzerland, however, Mr. Minder called for a much broader and tougher clampdown, striking a chord among citizens after the world financial crisis exposed major management failures at the financial giant UBS and other Swiss institutions.

Mr. Minder’s case was unexpectedly bolstered last month when Novartis, the pharmaceutical company, agreed to a $78 million severance payout for its departing chairman, Daniel Vasella. That set off a political storm and intense criticism from some investors, forcing Novartis to scrap the payout and prompting Mr. Vasella to tell shareholders that it had been a mistake.

Cristina Gaggini, an official from EconomieSuisse, the Swiss business federation, said Sunday that the business lobby had made some “major errors” in its efforts to stop Mr. Minder’s decade-long crusade, adding that the Novartis payout plan had amounted to a turning point in the referendum campaign.

After that, Ms. Gaggini said on Swiss national television, “It became impossible to return to a reasonable debate.”

Ahead of the vote, EconomieSuisse and Mr. Minder’s other opponents warned of dire consequences if the referendum passed, notably in terms of keeping Switzerland attractive to foreign companies and investors.

But Mr. Minder argued that Switzerland would benefit if it gave shareholders control over the companies in which they invested. Well over half the shares in many of the country’s largest companies are already held outside the country. “Investors put their money where they have the most to say, and that will clearly then be Switzerland,” Mr. Minder said ahead of the referendum.

Robin Ferracone, chief executive of Farient Advisors, an American advisory firm that specializes in executive compensation issues, said that even though the referendum would add “more burden to corporate processes, I do not predict an exodus from Switzerland,” because the tax and other benefits of being based in the country would still outweigh “the inconvenience” of having to adjust to stricter executive compensation rules.

Mr. Minder started his campaign after his family-owned business came close to bankruptcy because it had been a supplier of toothpaste and other body care products to Swissair, the airline that was grounded in October 2001.

While Swissair had run out of money, it still managed to pay an advance earlier that year of 12 million Swiss francs (about $9.6 million at the time) to a chief executive, Mario Corti, who then left shortly after the airline’s collapse.

Mr. Minder then broadened his campaign, accusing several bankers and other prominent executives of receiving “rip-off” pay packages. His campaign gained such momentum in recent months that relatively few such executives confronted him publicly, in this neutral and compromise-seeking country.

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Showdown on Executive Compensation in Switzerland

GENEVA — For Thomas Minder, a decade-long crusade against “fat cats” is about to come to a head.

The Swiss are set to vote Sunday on whether to adopt his proposal to impose some of the world’s most severe restrictions on executive compensation. The prospect is opposed by the banks and other multinational corporations that have long spearheaded the Swiss economy, who say the rules will damage the country’s business-friendly climate.

Mr. Minder, an entrepreneur and member of the Swiss Parliament, has taken the opposite view.

“If this gets voted, it will be the best export advertisement possible, because investors put their money where they have the most to say, and that will clearly then be Switzerland,” he said. The changes, he added, would guarantee that “investors will no longer have to worry about ridiculous backdoor deals.”

If Mr. Minder’s proposal is adopted, shareholders of companies listed in Switzerland would have a binding say on compensation for executives and board members, and the plan would obligate pension funds to participate in all such votes.

Mr. Minder’s proposal would also ban departure packages like the $78 million payout Novartis, the pharmaceutical company, agreed to give its departing chairman, Daniel Vasella. The payout set off a political storm and brought intense criticism from some investors, forcing Mr. Vasella to tell shareholders last week that his plan had been a mistake.

Those who violate the new rules would be subject to fines worth as much as their salaries for six years and prison sentences as long as three years.

The vote on Mr. Minder’s proposal comes after the United States and Germany, among other countries, authorized shareholders to cast nonbinding votes on executive pay. Such actions have been taken in response to Occupy Wall Street and other movements that have attacked corporate abuses that fueled the world financial crisis. On Wednesday, the European Parliament also agreed to limit bankers’ bonuses to twice their salaries.

The latest opinion polls suggest that voters will endorse his project, and Mr. Minder said the Novartis controversy had illustrated exactly why tougher rules were needed.

“There is something completely sick in a board like that of Novartis, where everybody is just friends with everybody,” he said. As to Mr. Vasella’s U-turn, Mr. Minder said, “It’s easy to renounce something which should in any case never have belonged to you.”

Still, Switzerland’s business lobby is warning of dire consequences if voters approve the proposals. While Switzerland is home to 7.5 million people, it punches far above its weight in economic terms, thanks largely to multinationals in sectors including banking, watches, food, pharmaceuticals and engineering. Many of these companies have most of their shareholding outside Switzerland.

“Switzerland risks becoming one of the most restrictive places for management in the world,” said Meinrad Vetter, an official from EconomieSuisse, the Swiss business federation. For foreign companies, he added, Mr. Minder’s proposal would “clearly be a very bad signal in terms of choosing Switzerland as a location to do business, because Switzerland has in fact always been a country that had been seen as very business friendly.”

Neither have many institutional investors endorsed the plan. The Ethos Foundation, based in Geneva, which is owned by 141 pension and other funds, recognized that Mr. Minder had pinpointed a genuine problem in Switzerland in terms of weak shareholders’ rights. But Mr. Minder’s proposal would push Switzerland “from one extreme to the other,” said Christophe Hans, head of communications at Ethos.

Mr. Hans also warned that Mr. Minder’s proposal could create a new set of managerial problems.

“You cannot give the board the right to choose the C.E.O. but then not make it able to finalize the hiring contract,” Mr. Hans said. “Which employee, let alone a C.E.O., would accept a job offer without first having the salary guaranteed?”

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DealBook: Libor Rate-Rigging Scandal Sets Off Legal Fights for Restitution

As unemployment climbed and tax revenue fell, the city of Baltimore laid off employees and cut services in the midst of the financial crisis. Its leaders now say the city’s troubles were aggravated by bankers’ manipulation of a key interest rate linked to hundreds of millions of dollars the city had borrowed.

Baltimore has been leading a battle in Manhattan federal court against the banks that determine the interest rate, the London interbank offered rate, or Libor, which serves as a benchmark for global borrowing and stands at the center of the latest banking scandal. Now cities, states and municipal agencies nationwide, including Massachusetts, Nassau County on Long Island, and California’s public pension system, are looking at whether they suffered similar losses and are weighing legal action.

Dozens of lawsuits filed by municipalities, pension funds and hedge funds have been consolidated into a few related cases against more than a dozen banks that are involved in setting Libor each day, including Bank of America, JPMorgan Chase, Deutsche Bank and Barclays. Last month, Barclays admitted to regulators that it tried to manipulate Libor before and during the financial crisis in 2008, and paid $450 million to settle the charges. It said other banks were doing the same, but none of them have been accused of wrongdoing.

Libor, a measure of how much banks must pay to borrow money from one another in the short term, is set through a daily poll of the banks.

The rate influences what consumers, businesses and investors pay on a wide range of financial contracts, as varied as mortgages and interest rate swaps. Barclays has said it and other banks understated the rate during the financial crisis to make themselves look healthier to the public, rather than to make more money from clients.

As regulators and lawmakers in Washington and Europe assess the depth of the Libor abuse and the failure to address it, economists and analysts are already predicting it could be one of the most expensive scandals to hit Wall Street since the financial crisis.

Governments and other investors may face many hurdles in proving damages. But Darrell Duffie, a professor of finance at Stanford, said he expected that their lawsuits alone could lead to the banks’ paying out tens of billions of dollars, echoing numbers from a recent report by analysts at Nomura Equity Research.

American municipalities have been among the first to claim losses from the supposed rate-rigging, because many of them borrow money through investment vehicles that directly derive their value from Libor. Peter Shapiro, who advises Baltimore and other cities on their use of these investments, said that “about 75 percent of major cities have contracts linked to this.”

If the banks submitted artificially low Libor rates during the financial crisis in 2008, as Barclays has admitted, it would have led cities and states to receive smaller payments from financial contracts they had entered with their banks, Mr. Shapiro said.

“Unambiguously, state and local government agencies lost money because of the manipulation of Libor,” said Mr. Shapiro, who is managing director of the Swap Financial Group and is not involved in any of the lawsuits. “The number is likely to be very, very big.”

The banks have declined to comment on the lawsuits, but their lawyers have asked for the cases to be dismissed in court filings, pointing to the many unusual factors that influenced Libor during the crisis.

The efforts to calculate potential losses are complicated by the fact that Libor is used to determine the cost of thousands of financial products around the globe each day. If Libor was artificially pushed down on a particular day, it would help people involved in some types of contracts and hurt people involved in others.

Securities lawyers say the lawsuits will not be easy to win because the investors will first have to prove that the banks successfully pushed down Libor for an extended period during the crisis, and then will have to demonstrate that it was down on the day when the bank calculated particular payments. In addition, investors may have to prove that the specific bank from which they were receiving their payment was involved in the manipulation. Before it even reaches the point of proving such subtleties, however, the banks could be compelled to settle the cases.

One of the major complaints was filed by several traders and hedge funds that entered into futures contracts that are traded through the Chicago Mercantile Exchange and that pay out based on Libor. These contracts were a popular way to protect against spikes in interest rates, but they would not have paid off as expected if Libor had been artificially lowered.

A 2010 study cited in the suit — conducted by professors at the University of California, Los Angeles and the University of Minnesota — indicated that Libor was significantly lower than it should have been throughout 2008 and was particularly skewed around the bankruptcy of Lehman Brothers.

A separate complaint filed in 2010 by the investment firm Charles Schwab asserts that some of its mutual funds, including popular ones like the Schwab Total Bond Market Fund, lost money on similar investments.

The complaints being voiced by municipalities are mostly related to their use of a popular financial contract known as an interest rate swap. States and cities generally enter into these swaps with specific banks so that they can borrow money in the bond market. They pay bondholders based on a floating interest rate — like an adjustable-rate mortgage — but end up paying their bankers a fixed rate through a swap. If Libor is artificially lowered, the municipality is stuck paying the same fixed rate, but it receives a smaller variable payment from its bank.

Even before the current controversy, some municipal activists have said that banks took advantage of the financial inexperience of municipal officials to sell them billions of dollars of interest rate swaps. Experts in municipal finance say that because of the particular way that cities and states borrow money, they are especially liable to lose out on their swaps if Libor drops.

Mr. Shapiro, who helps cities, states and companies negotiate these contracts, said that if a city had interest rate swaps on bonds worth $1 billion and Libor was artificially pushed down by 0.30 percent, which is what the lawsuits contend, that city would have lost $3 million a year. The lawsuit claims the manipulation occurred over three years. Barclays’ settlement with regulators did not specify how much the banks’ actions may have moved Libor.

In Nassau County, the comptroller, George Maragos, said in a statement that according to his own calculations, Libor manipulation may have cost the county $13 million on swaps related to $600 million of outstanding bonds.

A Massachusetts state official who spoke on the condition of anonymity because of potential future legal actions, said the state was calculating its potential losses.

“We are deeply concerned and we are carefully analyzing all of our options,” the official said.

Anne Simpson, a portfolio manager at the California Public Employees’ Retirement System — the nation’s largest pension fund — said that the fund’s officials “are sifting through the impact, but there certainly is an impact.”

In Baltimore, the city had Libor-based interest rate swaps on about $550 million of bonds, according to the city’s financial report from 2008, the central year discussed in the lawsuit. The city’s lawyers have declined to specify what they think Baltimore’s losses were.

The city solicitor, George Nilson, said that the rate manipulation claims meant that the city lost out on money when it needed it the most.

“The injury we suffered during the time we suffered it hurt more because we were challenged budgetarily,” Mr. Nilson said. “Every dollar we lost due to illegal conduct was a dollar we couldn’t pay to keep open recreation centers or to pay police officers.”

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Off the Shelf: When Retirees Are Shortchanged for Corporate Profits

Now, inevitably, comes the book. In “Retirement Heist: How Companies Plunder and Profit From the Nest Eggs of American Workers” (Portfolio/Penguin, $26.95), Ms. Schultz herds all her journalistic cattle into a single corral, laying out by what any measure is a damning indictment of the broken pension promises too many American corporations have made to their workers. For anyone seriously interested in the retirement industry — and that’s what it amounts to, an industry — this book should be required reading.

For just about everyone else, alas, “Retirement Heist” is hard to recommend. Ms. Schultz is a top-tier newspaper reporter, but as an author, as a shaper of narrative, well, she’s a top-tier newspaper reporter. The book reads like a very, very long Journal article or, worse, a hefty think-tank white paper. This may have been unavoidable, but its sheer density of pension and related jargon will defeat many readers who aren’t accountants or actuaries. I had to stop a number of times in the first 50 pages just to fully understand what Ms. Schultz was trying to tell me.

Which is a shame, because she has quite a story to tell. It’s hard to distill the book’s far-flung elements into a single narrative, but it appears to come down to this: After the huge run-up in stocks during the 1980s, American corporations were sitting on billions of dollars in pension funds that weren’t going to be paid to retirees anytime soon. They began pushing to use the money themselves, an effort that resulted in a series of new accounting guidelines and federal regulations that, in time, allowed them to put pension monies to all sorts of uses never before envisioned. Financing corporate restructurings. Paying for retiree health benefits. Paying for golden parachutes. Some companies simply eliminated the pension plan altogether and took the money themselves. At the same time, Ms. Schultz shows, companies like I.B.M. steadily cut back on pension and health benefits while assuring employees that it was making the plan more “modern.”

The mind-boggling complexity of many pension statements prevented most employees from understanding what was going on; a notable exception came at I.B.M., where a handful of older workers figured it out and began protests. Corporations, of course, rarely if ever acknowledged that they were shortchanging their retirees. Everything they were doing, some pointed out, was not only completely legal but also a boon to shareholders.

In Ms. Schultz’s telling, there was almost nothing that some corporations wouldn’t do to pare their pension obligations, from canceling death benefits to instituting “clawbacks” — that is, informing retirees that they had somehow been overpaid and demanding a lump-sum repayment that very few were able to afford. No promise, it would appear, was too small to be broken. A reader should feel something like outrage at this kind of behavior, but I felt little, in large part because the book, especially in its first half, focuses more attention on tricks played by employers than the plight of victimized retirees. Pension abuse affects millions of Americans, yet not enough of them make it into the pages of “Retirement Heist.”

Where they do, the book jumps to life. Some of these stories are heart-rending. There’s the corporate pilot who was presented with a clawback bill even as he struggled with esophageal cancer, a debt his widow continued scrambling to pay even after his death. And the retiree who lost his death benefit on his deathbed. And the 80-year-olds forced to take jobs at Wal-Mart to pay for health care their companies canceled. And the N.F.L. players who fought for disability benefits after they retired. This book could have used many more of these stories.

Given the complexity of pension and accounting regulations, “Retirement Heist” cries out for history and context, a sense of where the pension world came from, the forces that shaped its rise and how companies historically dealt with pensioners. Yet little of that is here; in the text, it’s as if pensions sprang up fully formed in the mid-1980s to be abused by companies in the 1990s.

A small industry of pension consultants has emerged to show companies how to pare and profit from their retirees, yet the book, despite repeatedly citing the names of these firms, gives us little information about their origins, operations and size. Even if they (smartly) wouldn’t discuss their business, aren’t there former employees willing to talk? How about a Michael Moore-style visit to one of their headquarters?

I don’t mean to be too hard. Ms. Schultz has done heroic work compiling her facts, and is to be applauded. But the best journalism, unfortunately, does not always ensure the best book, an unpleasant fact that always leaves me feeling a little wistful.

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DealBook: ConvaTec Said to Bid for Kinetic Concepts

ConvaTec, a company owned by two private equity firms, has made a bid for Kinetic Concepts that is higher than the wound-healing technology company’s $4.9 billion deal with another group of investors, a person briefed on the matter told DealBook on Sunday.

ConvaTec, which is owned by Avista Capital Partners and Nordic Capital, has obtained “highly confident” financing letters from Goldman Sachs and the Jefferies Group. Such correspondence means that while ConvaTec has not secured formal lending commitments, its investment banks believe that they can arrange the necessary debt financing.

Kinetic Concepts agreed last month to sell itself to a group of investors led by Apax Partners in the largest leveraged buyout since the financial crisis. Apax, along with the pension funds Canada Pension Plan Investment Board and the Public Sector Pension Investment Board, agreed to pay $68.50 a share in cash. Including Kinetic Concepts’ debt, the deal is valued at $6.3 billion.

Under the terms of Kinetic Concepts’ agreement with the Apax consortium, it could “initiate, solicit and encourage” higher bids until 11:59 p.m. on Sunday. Should the company strike a deal that its board determines is superior to the Apax offer, it will have to pay that group a $51.8 million breakup fee.

The bid by Convatec is unusual because private equity firms generally shun “jumping” bids once a deal is announced.

One possible complication for Convatec is unease about the financing markets, which have grown more volatile during the recent market turmoil. At least one potential transaction, Liberty Media’s proposed takeover of Barnes Noble, was scuttled because of rising financing costs. Liberty instead decided to buy a 16.6 percent stake in the bookseller for $204 million.

Kinetic Concepts has long been seen as an attractive takeover target because of its market-leading position in negative-pressure therapy, a technology that uses vacuum pumps to treat wounds. In recent years, however, lower-priced competitors have cut into the company’s market share.

Because of its relatively stable revenue, the wound-care industry has drawn the interest of private equity firms in recent years. Avista and Nordic bought ConvaTec from Bristol-Myers Squibb in 2008, in what was the largest leveraged buyout that year.

Shares in Kinetic Concepts closed on Friday at $65.37.

News of Convatec’s offer was reported earlier by Bloomberg News.

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Technology Investors Turn Wary on Ventures

REDWOOD CITY, Calif. — Even as Wall Street trembles, the market for investing in tech start-ups remains white-hot. Still, some investors are proceeding with extreme caution.

Saying they learned their lesson in the dot-com boom and bust, and the 2008 recession, the institutional investors — pension funds, university endowments and foundations — that put money in venture capital funds are more selectively choosing the firms in which they invest, doing exhaustive research before handing over money, and in some cases driving hard bargains for more favorable management fees and shares of profits.

Though most say they remain bullish on venture capital, they know that as the limited partners, they would be the ones to feel the pain if a bubble bursts. After all, they put up most of the money.

And as they watch the stock market gyrate, they remember all too clearly the nightmarish consequences of having too much of their money tied up in illiquid assets like venture capital in late 2008 and 2009. They have recently slowed their investing in venture funds and could cut back more.

“Whenever there’s market tumult, people get more nervous about how illiquid and long-dated their portfolios are,” said Chris Douvos, co-head of private equity at the Investment Fund for Foundations. “My worry is if you have continued tumult, it’s going to scare people away.”

Even before last week, the days when institutional investors threw money at venture funds because they felt lucky just to be able to invest were gone. More recently, they want more transparency from the famously tight-lipped funds, and in some cases, they are getting it. One firm has started giving limited partners files with its portfolio companies’ financial information, a rarity. And limited partners say venture capitalists are increasingly available for one-on-one meetings.

“I call it the Madoff effect,” said Jordan Silber, a partner in the venture capital group at the law firm Cooley, speaking recently at the Venture Capital Investing Conference here in Redwood City, outside of San Francisco. “We’re seeing extremely deep dives and due diligence and looking at people and their track record in a way we’ve just never seen before.”

Despite the fervor over companies that have gone public or are on the verge of doing so, like LinkedIn, Facebook and Groupon, and even though venture capitalists are investing more money in start-ups than they have for the last two years, institutional investment in venture capital funds is near the five-year quarterly low.

Limited partners invested $2.7 billion in 37 funds in the second quarter, half of which went to a single firm, Accel, an investor in Facebook and Groupon. Investment was down from $7.6 billion in 42 funds in the first quarter, according to the National Venture Capital Association, though it was up 28 percent from the same period last year.

Limited partners say they are wary because venture capitalists are investing in start-ups at valuations several times higher than a year ago.

“I look at some of the companies and they really don’t have a business model, so I’m afraid,” said Kelvin Liu, a director at Invesco Private Capital, at the conference, which was hosted by International Business Forum. “To people who are willing to pay at $5 or $10 billion valuations, I say: ‘Why are you doing that? Take your money out.’ ”

Venture capital attracts universities in particular, which have followed the so-called Yale model by investing in alternative, illiquid assets. But universities and other institutional investors froze in late 2008. Suddenly faced with shrinking investments in public equities, many, including Duke, Columbia and Harvard, sold or considered selling their stakes in illiquid venture funds on the secondary market or sharply decreased the amount they invested in venture.

Now, just as limited partners are tiptoeing back to the asset class, talk of a another stock market crash as well as of a tech bubble is making them skittish, even as they say they remain long-term investors and are heartened by recent initial public offerings.

“We are absolutely positive, and it’s been a great exit environment over the last six months,” said Nicole Belytschko, who leads venture capital investing at C.M. Capital. “But at the same time, while we’re getting a lot of capital back from very good exits, our managers are deploying capital at very expensive valuations.”

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