Here is the what-if you’ve all been waiting for. Venture returns improved through the first half of the year on the wings of a better exit environment, especially for IPOs, a new report finds.

If only the improvement in the exit markets had continued.

Venture returns across all time periods — except the 15-year period — rose in the second quarter, according to a report today from Cambridge Associates and the National Venture Capital Association. The quarter was the first since late 2009 to show the 10-year investment horizon in positive territory and the third straight where firms distributed more capital than they called. (See returns details in the chart below.)

The index value for 10-year returns improved to 1.3 in Q2, up from -0.1 in Q1 and -4.1 in the same quarter a year earlier. Despite the improvement, 10-year VC returns lag the public markets, with the Dow Jones Industrial Average posting an index value of 4.2 for the 10-year period, and the Nasdaq and S&P 500 recording index values of 2.5 and 2.7, respectively.

With the financial ungluing that began this summer, the industry’s recovery is obviously in jeopardy. “Since June 30, 2011, the volatility of the public markets and economic uncertainty have challenged the IPO market, which may hinder distributions in the near term,” Theresa Sorrentino Hajer, a managing director at Cambridge Associates, wrote in the report. “If prolonged, this uncertainty may also negatively impact private company valuations and, therefore, fund performance going forward.”

This obvious raises the question of what we can expect in coming quarters.

See the Cambridge/NVCA press release here. The Full report is available at the NVCA website.

Related posts:

  1. Venture Capital & Private Equity Returns See Short Term Slip In First Quarter, But VC Funds Improve Long Term
  2. Australian Venture Capital And Private Equity Turn In Solid Financial Returns
  3. Venture, PE Returns Rise In Third Quarter And Continue Rebound
  4. PE and VC Returns Improve, But Exits Still Lacking
  5. Slight Improvement In Venture Returns Reported

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