Fund performance: Pennsylvania’s venture portfolio trumpets big gains

The Pennsylvania Public School Employees’ Retirement System has seen mixed results over the past decade from its venture capital investments.

Better days may be ahead. The portfolio made significant gains last year, with impressive advances in funds from LLR Partners, Psilos Group, Cross Atlantic Capital Partners and Aisling Capital.

The pension manager holds 17 venture funds with vintages of 2003 to 2012, according to its most recent portfolio report. Several are new additions, including the 2012 Tenaya Capital VI and a pair of 2011 funds from Summit Partners: Summit Partners Growth Equity Fund VIII and Summit Partner Venture Capital Fund III.

The funds are nearly evenly split between positive and negative IRRs. Seven have IRRs above 0 and eight have returns below, according to the portfolio report, updated to December 2012.

PSERS does not report an IRR for its Jefferson Partners Fund IV, which is likely a negative number. But it does post negative IRRs for its new Tenaya fund and for Summit Partners Venture Capital Fund III, both of which are too young to have meaningful numbers.

Adjusting for these three funds, and the split between positive and negative is even.

However, the portfolio gained significant ground during 2012. Nine of the funds improved and five did not. (The other three are the recent additions and too young to have a year-ago IRR.)

At the head of the class are two LLR funds. The 2008 LLR Equity Partners III saw its IRR rise to 17.8% from -1.73% in September 2011. LLR Equity Partners II now has an IRR of 13.29%, up 80% from September 2011.

Psilos Group Partners III also advanced nicely, as did Aisling Capital II and the Cross Atlantic Capital Partners Co-Investment Fund II.

Near the bottom of the list is the 2003 Quaker BioVentures, which lost ground over the period. The secondary fund CS Strategic Partners IV from Credit Suisse Private Equity also struggled.

In the accompanying chart, we list the 17 funds with their commitments, distributions, investment multiples and IRRs from December 2012 and September 2011.