Late Friday, the University of Texas Investment Management Co. (UTIMCO) released fund-by-fund performance data for its private equity portfolio. The disclosure was made in response to several requests under the Texas Freedom of Information Act (FOIA), and could represent the first private market domino to fall as the post-Enron public clamors for greater fiscal transparency.
The UTIMCO data includes 124 active and closed private equity funds, 116 of which had included confidentiality language in their limited partnership agreements to prevent such a dissemination of information. Thirty-two of those partnerships signed waivers releasing UTIMCO from liability, while the rest sat idly by without registering any legal challenges with the Texas Attorney General’s office. This is in contrast to a situation brewing in Massachusetts, where three venture firms are preparing to sue the state pension fund so as to block similar fund performance disclosures.
;There were a lot of ‘on the phone’ objections and it’s safe to say that the partners, almost without exception, were not happy,” said Bob Boldt, CEO and chief investment officer of UTIMCO. “They were not even objecting to the public right to have the information, but rather the interpretation of that information. Some of the returns for the young venture firms look very, very bad… because these are long-term investments.
Indeed, of the 38 funds UTIMCO has invested in since 2000, just four had a positive internal rate of return (IRR) as of August 31. None of those winners were pure venture firms, with the closest being a vehicle from full-service private equity shop Warburg Pincus. That fund, Warburg Pincus Private Equity VIII LP is listed with an IRR of 14.69%, although the IRR only represents internal portfolio write-ups instead of actual cash-on-cash returns.
On the opposite end of the spectrum is Austin Ventures, which has written its 2001 fund portfolio down by -53.99%. It is important to note, however, that Austin Ventures lists UTIMCO as an LP in five funds dating back to 1995, and that those investments have produced an aggregate IRR of 45.57%.
In all, UTIMCO has a one-year private equity return rate of -15.41%, a three-year return rate of 1.98%, a five-year return rate of 6.90% and a 10-year return rate of 15.05%. Some of the portfolios biggest winners include Information Technology Ventures LP (1995) with a 90.11% IRR, Austin Ventures IV LP (1995) with a 73.25% IRR and Doughty Hanson & Co. II (1996) with a 50.21% IRR. The most disappointing pre-2000 funds for UTIMCO have been Crescendo Ventures III (1999) with an IRR of -24.62%, Willis Stein & Partners II LP (1998) with -23.36% and Baker Communications Fund LP (1998) at -16.26%.
PE Week could not contact most of the affected general partnerships by press time, but those we did reach expressed concern about how much information UTIMCO and others will ultimately disclose.
;I’m not so much concerned about the release of fund performance numbers, but more that it could be the beginning of a slippery slope,” said David Parker, a San Diego-based general partner with Ampersand Ventures, which has included UTIMCO as an LP on three separate funds. “I think a lot of the push-back would come if LPs began releasing information on the individual portfolio companies.
Boldt originally told PE Week that UTIMCO would not be in the business of providing such information, but he seemed to hedge when asked the same question during a call with reporters Friday evening. During the call, Boldt said that UTIMCO had yet to receive such a request, and that he would prefer not to deal with a hypothetical situation. PE Week did put in an FOIA request for the fund performance data, but has not yet decided whether or not it will request a company-by-company report on the funds’ underlying assets.
PE Week continues to follow this story, and has posted the entire UTIMCO report in the protected Fund News section of this Web site. Subscribers can also read a more detailed breakdown of the data in the October 14 print edition of PE Week (to subscribe, click here ). When reading these numbers, please bear in mind that most of them are for active fund partnerships, whose short-term results are not necessarily indicative of the amount of capital they will ultimately return.