Fund performance: Mid-decade funds miss venture’s boom

Here is more evidence of the before and after in venture.

Toward the latter years of the past decade, venture fund performance began to take off. Before then, performance is less robust.

This pattern plays out in the Los Angeles City Employees’ Retirement System’s venture portfolio. The pension manager holds 15 venture and venture-related funds from vintages 2004 through 2007.

Performance is far less impressive than what will come later. Only three funds have IRRs in the low teens, according to a recent portfolio report. Nearly half the portfolio is in single digits and five funds remain in the red.

The top fund is Vicente Capital Partners’ generalist-oriented growth and later stage fund from 2007. Its IRR was 12.6 percent as of December 2014, according to the report.

Not far behind is Technology Crossover Venture’s fifth fund from 2004 with an IRR of 11.4 percent, as of December. The 2007 DFJ Frontier Fund II was neck and neck with an IRR of 11.3 percent.

LACERS also holds Spark Capital’s first fund and the large-scale Polaris Venture Partners V. Spark’s first fund had an IRR of 9.1 percent as of December and Polaris Venture Partners V was at 9.9 percent IRR.

At the bottom of the portfolio, NGEN Partners’ second fund from 2006 still struggles with an IRR of -52.2, and Craton Equity Investors I mustered a -19.7 percent IRR.

The portfolio favors mid and small sized funds with all but three under $400 million in size.

The accompanying table shows the 15 funds with their commitment levels, distributions and IRRs.