Venture capital has been an underperforming asset class, but firms can no longer use the past decade’s lack of liquidity as an excuse for poor performance.

This was one message from a panel of limited partners at the Venture Capital Investing Conference in San Francisco on Wednesday. They said they had seen numerous partnerships distribute cash and some funds with 5x performance or better.

“It’s achievable,” said Nicole Belytschko, director of private equity at C. M. Capital. The job of today’s LPs is to figure out who the next 5x performers will be, she said.

Several LPs said they view a 2.5x return as a benchmark for venture funds. It is what Top Tier Capital Partners looks for while trying to minimize risk, said Principal Jessica Archibald. Less than that and investing becomes a “difficult exercise,” said Belytschko.

During a wide-ranging conversation, one of the panel’s LPs claimed GP transparency has improved in the past several years. More firms have investor-relations teams and pass on detailed portfolio company information at their annual meetings.

Several also noted they are more closely examining smaller funds and particularly the microcaps run by super angels. “We are looking at the space (but) we have not invested in a fund yet,” said Archibald.

In addition they offered the following observations about what’s hot and what’s not:

• One thing that is not is cleantech. “You can’t raise a cleantech fund,” said Robert Hofeditz, a partner at Probitas Partners.
• China also looks to be awash with cash, he added. “That clearly looks like a bubble to me.”
• On the other hand, there will be some Brazilian funds raised, said Hofeditz.
• Across the Atlantic, “we’re starting to see Europe gain a little traction,” said Archibald. Top Tier also is making more commitments in Boston and New York, she said.

Photo courtesy of Shutterstock.