Fund Performance: Washington State’s Secret Venture Portfolio

Examine the Washington State Investment Board’s public portfolio report and it is easy to believe the state pension fund manager has had a hand’s-off policy toward venture capital.

This is anything but true. By way of its Pathway and Invesco portfolios, WSIB has been an active venture investor over the past seven years, participating in some of the latest funds from such top firms as Battery Ventures, Canaan Partners and Austin Ventures, VCJ has learned.

The results have been quite good. Many of WSIB’s most recent funds show impressive IRRs, even at this early stage in their development.

It should be noted that none of the 26 funds the two portfolios made commitments to since 2003 show up in the performance reports WSIB releases publicly every quarter. WSIB’s public portfolio report shows it has only made six venture capital investments outside the two portfolios since 2003. VCJ obtained a list of the funds in the Invesco and Pathway portfolios and their performance through a public records request.

In the accompanying chart are the 14 investments made from 2006 to 2010 with their commitment levels and performance through June 2012. The portfolios have not made an investment since 2010.

The performance of the 2006 to 2010 batch is strong. Four of the funds, more than a quarter of the total, have IRRs above 20 percent. Another four have IRRs between 10% and 20 percent. Of the remaining funds, only one has a negative IRR.

Standout funds include Spark Capital II, with an IRR of 57.74 and distributions to WSIB of $14.1 million. Union Square Ventures 2008, which is widely held by public pension funds, has an IRR of 54.43 percent.

The next comes Battery Ventures’ VIII Side Fund, which has an IRR of 26.17% and distributions so far of $8.1 million. Insight Venture Partners VI has an IRR of 23.81 percent.