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Fund performance: WSIB’s mid-decade portfolio benefits from small-fund strategy

A focus on mid-size and small funds has brought benefits to a mid-decade venture portfolio at Washington State Investment Board.

Nearly 40 percent of the funds sported double-digit IRRs as of December 2015 and only one was in negative territory. Pooled returns for the portfolio’s three vintage years of 2003, 2004 and 2005 are in the single digits.

The portfolio is part of WISB’s Pathway and Invesco holdings and has stayed away from large-scale capital pools. Only two of the 18 funds are larger than $600 million and only one is above $1 billion.

Instead, portfolio managers have favored funds in the $200 million to $560 million range, with an even mix of early-stage and multi-stage investment strategies.

The portfolio is led by Union Square Ventures 2004, which as of December had an IRR of 67.02 percent, according to a recent performance report. The fund, with $75.3 million of distributions on paid-in capital of $5.9 million, was head and shoulders above the rest of the portfolio.

Union Square Ventures used the $125 million fund to invest in Etsy, Twitter and Zynga, Thomson Reuters data shows.

The portfolio’s second-best performer was 2005 vintage JMI Equity Fund V, with an IRR of 39.42 percent, according to the December report. Insight Venture Partners V Coinvestment 2005 followed with a 26.69 percent IRR.

The portfolio holds Canaan VII, which had an 18.6 percent IRR as of December, as well as Spark Capital’s first fund and funds from Battery Ventures and Trident Capital.

A complete list of the funds can be found in the accompanying table with IRRs, distributions and commitments.