Pennsylvania PSERS’ Cautious Approach To Venture Is Bringing Mixed IRRs: Slideshow

Pennsylvania’s Public School Employees’ Retirement System has been a cautious investor in venture capital. But it hasn’t been afraid to put capital to work.

The dollar value of the bets PSERS has placed in the first decade of the new millennium is up considerably over the 1990s, even though it hasn’t purchased a share in a venture fund since 2008.

So far, performance is mixed. The same number of these new funds from the past decade have positive IRRs as negative ones, according to a peHUB analysis of the most recent PSERS portfolio report dated March 2011. And it isn’t just a recent fund vs. mature fund split. Four funds with 2005 or more recent vintages have positive IRRs. Six have negative ones.

PSERS’ $47 billion portfolio is a sprawling affair. The private markets slice of it, which includes venture capital, private equity and private debt, makes up 21.5% of holdings, according to a September financial statement posted on the organization’s Web site. The venture capital piece is just 1.8% compared with the 15.8% of assets in private equity.

The system appears to favor a low risk approach to venture. Seven of the 20 funds it has joined since 2000 appear to focus on later stage investments and nine have a balanced approach. Only two are dedicated to early stage and two target the secondary market.

In total, capital commitments since the turn of the millennium come to $1.56 billion, the analysis of the March report shows. This is a substantial increase from $575 million in the 1990s. The years 2006 to 2008 saw a significant share of the investing – $760 million – earmarked for nine funds.

In the following slideshow, we list PSERS’ 10 most recent venture funds chronologically with their IRRs and capital commitments. It is not a portfolio you would see just anywhere.

[slideshow]

[slide title="CSFB Strategic Partners III-VC"]

Vintage: 2005

Firm: Credit Suisse Private Equity

Commitment: $50 million

Cash In: $48.5 million

Cash Out: $24.2 million

Portfolio Value: $34 million

IRR: 6.18%

[slide title="Aisling Capital II"]

Vintage: 2006

Firm: Aisling Capital

Commitment: $50 million

Cash In: $42.9 million

Cash Out: $6.4 million

Portfolio Value: $27.6 million

IRR: -7.54%

[slide title="Co-Investment Fund II"]

Vintage: 2006

Firm: Cross Atlantic Capital Partners

Commitment: $135 million

Cash In: $93.8 million

Cash Out: $0

Portfolio Value: $57.2 million

IRR: -20.25%

[slide title="Psilos Group Partners III"]

Vintage: 2007

Firm: Psilos Group Managers

Commitment: $62.5 million

Cash In: $45.6 million

Cash Out: -$5,475

Portfolio Value: $50 million

IRR: 3.3%

[slide title="Quaker BioVentures II"]

Vintage: 2007

Firm: Quaker BioVentures

Commitment: $100 million

Cash In: $51 million

Cash Out: $3.4 million

Portfolio Value: $46.2 million

IRR: -1.81%

[slide title="StarVest Partners II"]

Vintage: 2007

Firm: StarVest Partners

Commitment: $50 million

Cash In: $18 million

Cash Out: $201,996

Portfolio Value: $16 million

IRR: -6.93%

[slide title="Tenaya Capital V-P"]

Vintage: 2007

Firm: Tenaya Capital

Commitment: $75 million

Cash In: $44.5 million

Cash Out: $3.4 million

Portfolio Value: $53.5 million

IRR: 14.34%

[slide title="Aisling Capital III"]

Vintage: 2008

Firm: Aisling Capital

Commitment: $50 million

Cash In: $7.6 million

Cash Out: $0

Portfolio Value: $5.3 million

IRR: -33.09%

[slide title="CS Strategic Partners IV VC"]

Vintage: 2008

Firm: Credit Suisse Private Equity

Commitment: $50 million

Cash In: $39.6 million

Cash Out: $4.4 million

Portfolio Value: $42.2 million

IRR: 9.73%

[slide title="LLR Equity Partners III"]

Vintage: 2008

Firm: LLR Partners

Commitment: $187.5 million

Cash In: $73.1 million

Cash Out: $9.3 million

Portfolio Value: $58.4 million

IRR: -5.2%

[/slideshow]

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