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Fund performance: Struggling late-stage portfolio shunned brand-name funds

The Pennsylvania Public School Employees’ Retirement System favored late-stage managers, dodged brand name funds, pledged money inconsistently and is struggling with the returns on its venture investments.

Funds from Tenaya Capital, Aisling Capital and LLR Partners are the portfolio’s big winners, with the 2008 Aisling Capital III showing a remarkable performance gain in the final nine months of last year.

But almost as many funds sported negative IRRs as positive ones at the end of the third quarter, and fewer funds improved from December 2012 to September 2013 than lost ground, according to a recent portfolio report. Included among the funds with negative IRRs are three from 2012, so the split isn’t quite as bad as it at first seems.

The pension manager has 17 venture and secondary funds with vintages of 2003 to 2012. Few of industry’s big brand name firms made the cut, though funds from Tenaya and Summit Partners are included.

Money was allocated inconsistently. Three funds were added in each of the years 2003, 2008 and 2012, and four in 2007. But no funds were added from 2009 to 2011 and only one each in 2004 and 2005.

Seven funds focus on later-stage investing and another seven on a balanced or generalist approach. PSERS has shunned early-stage investments, based on the fund type data from Thomson Reuters (publisher of VCJ). Thirteen of the funds are larger than $800 million and another nine are mid-sized, ranging from $200 million to $650 million.

Tenaya Capital V-P is the portfolio’s top fund, followed by Aisling Capital III. Two LLR funds have done well.

The accompanying table lists the funds with their IRRs , distributions and commitments.