Firms & Funds

Fund performance: UTIMCO’s investment on young firms continues to pay off

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A University of Texas cheerleader performs in front of a giant Texas flag draped on the UT Tower during the Hex Rally in Austin, Texas on November 21, 2011. The tradition started in 1941 to break a losing streak against rival the Texas A&M Aggies. According to legend, in 1941 students consulted fortune teller Madam Augusta Hipple who instructed them to burn red candles the week before the game as a way of "hexing" the Aggies. UT's Hex Rally and A&M's Bonfire traditions are both ending this year as Texas A&M joins the SEC after the end of the season. Photo taken November 21, 2011. REUTERS/Julia Robinson (UNITED STATES - Tags: SPORT FOOTBALL) - RTR2UCR6

The University of Texas Investment Management Company’s bet on young, emerging venture firms over the past decade or so, including Union Square Ventures, Spark Capital and Foundry Group, continues to pay off.

Funds from Union Square and Spark showed strong gains in UTIMCO’s most recent portfolio report and led the money manager’s collection of mid-decade venture investments as of February. Foundry’s 2007 fund held third place.

Funds from the more established firms Technology Crossover Ventures and Artiman Ventures also advanced nicely in the six months from August 2013 to February 2014, according to the report, as did one from the Gobi Partners, which was founded one year before Union Square in 2002.

UTIMCO’s mid-decade venture portfolio includes 25 funds. Overall, it shows solid performance.

A total of 22 of the funds had positive IRRs and three were negative as of February. The majority advanced over the six months, but modestly so, for the most part.

Standouts were Spark Capital II, which saw its IRR rise to 58.54 percent from 42.35 percent. The fund benefited from its sale of Adap.tv to AOL. Interestingly, the Massachusetts Pension Reserves Investment Management Board, which also invested in the Spark fund, listed its IRR at 64.03 percent as of December, demonstrating how LPs can calculate performance results differently.

Union Square Ventures 2004 also saw improvement, according to UTIMCO. Its IRR rose to 69.88 percent from 65.59 percent, the report shows. The fund invested in Tumblr, which sold to Yahoo last year.

TCV’s 2007 seventh fund also logged a nice gain with posted IRR of 18.63 percent. The firm has three funds in the portfolio’s top 10, while Arch Venture Partners has two.

Another winner was Artiman’s 2006 second fund, which advanced to an IRR of 8.45 percent.

At the bottom of the portfolio remain two 2007 funds from Intellectual Ventures, including Invention Development Fund I, which had an IRR of -45.28 percent. Another weak performer came from Care Capital.

The accompanying table lists the 25 funds with their commitments, distributions and IRRs.