Fund Performance: Venture Funds Show Gains in CalPERS’ Sacramento Portfolio

Pension fund giant California Public Employees’ Retirement System is clearly not what you would call bullish about venture capital. The money manager will tell just about anyone who asks that it is sharply reducing its commitments to new funds.

And yet for all the angst, the venture holdings in its Sacramento Private Equity Partners portfolio posted nice performance improvements through the middle of last year, according to the LP’s most recent portfolio report.

Eleven of the 15 funds showed a solid improvement in IRR over the 12 months ended September 2012, and nine, or 60%, have positive IRRs while six have negative ones, the report shows.

The portfolio is managed by Oak Hill Investment Management and invests in venture capital, small and mid-market buyout, and distressed opportunity funds. Its venture selections are evenly balanced between early and late stage funds, with such holdings as Institutional Venture Partners XIII and New Enterprise Associates 13. Three of the funds have a balanced approach to investing.

Several standouts deserve note. Emergence Capital Partners II had an IRR of 33.3% as of September and a big gain over the 12 months. NEA 13 is near the top of the list with a 15.4% IRR. Pinnacle Ventures Debt Fund III, also a top performer, is in third place.

Other funds are struggling. Tallwood III Annex is the worst performing fund with an IRR of -24.1%, which represents a big improvement over the year. Pinnacle Ventures Equity Fund I-O has an 10% IRR.

Also well into the red are Third Rock Ventures II and TauTona Partners, but both are 2010 funds so are too young to draw meaningful conclusions.

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