Bubble Year IRRs A Drag On SFERS Venture Portfolio: Slideshow

The San Francisco Employees’ Retirement System, like many LPs, loaded up on venture capital funds during 2000 and 2001 when the hope of big Web 1.0 wins peaked and then faded.

Many of these bubble era funds struggle to make money. Of the 15 early, late, balanced and generalist SFERS funds with vintages of 2000 to 2002, eight have positive IRRs and seven have negative ones, according to a peHUB analysis of the pension fund’s June 2011 portfolio report.

Among just the balanced and generalist funds (the focus of this week’s slideshow), only two have returned more cash than general partners called. Others hang onto potentially lucrative portfolios, hoping for their exit market fortunes to shift.

The majority, however, failed to make good on expectations of lucrative distributions in a fundraising cycle gone astray. The median IRR among the balanced and generalist funds from this period is -1.95, the analysis found. Four of them look unlikely to ever turn the corner, with the value of their distributions and portfolios together well below contributed cash.

In the past two weeks, we’ve examined the late and early stage holdings in SFERS’ diverse and disciplined portfolio. This week’s focus on balanced and generalist funds highlights investments from the early years of the past decade. (Next week we will look at the more promising investments of the second half of the decade.)

Several fund managers deserve to be called out for navigating this difficult environment. Battery Ventures and Sprout Group both returned more capital than called, though just barely. Polaris Venture Partners and Weston Presidio Capital have existing portfolios that could rescue the fortunes of their funds.

In the following slideshow, we list the funds and their IRRs from worst to best. As a point of background, SFERS had assets under management of $13 billion at the end of fiscal 2010 with 3.8% of them in venture.

[slideshow]

[slide title="No. 10: Advanced Technology Ventures VI"]

Vintage: 2000

Firm: Advanced Technology Ventures

Commitment: $20 million

Cash In: $20 million

Cash Out: $6.25 million

Portfolio Value: $2.37 million

IRR: -9.13%

[slide title="No. 9: Grotech Partners VI"]

Vintage: 2000

Firm: Grotech Ventures

Commitment: $$15 million

Cash In: $15 million

Cash Out: $6.46 million

Portfolio Value: $4.27 million

IRR: -5.35%

[slide title="No. 8: Worldview Technology Partners IV"]

Vintage: 2000

Firm: Worldview Technology Partners

Commitment: $9.07 million

Cash In: $8.48 million

Cash Out: $3.28 million

Portfolio Value: $3.05 million

IRR: -4.76%

[slide title="No. 7: Polaris Venture Partners III"]

Vintage: 2000

Firm: Polaris Venture Partners

Commitment: $40 million

Cash In: $39.6 million

Cash Out: $16.67 million

Portfolio Value: $13.23 million

IRR: -4.14%

[slide title="No. 6: Advanced Technology Ventures VII"]

Vintage: 2001

Firm: Advanced Technology Ventures

Commitment: $18 million

Cash In: $17.19 million

Cash Out: $8.2 million

Portfolio Value: $9.9 million

IRR: 1.11%

[slide title="No. 5: Menlo Ventures IX"]

Vintage: 2001

Firm: Menlo Ventures

Commitment: $15 million

Cash In: $15 million

Cash Out: $10.93 million

Portfolio Value: $4.92 million

IRR: 1.14%

[slide title="No. 4: Weston Presidio Capital IV"]

Vintage: 2000

Firm: Weston Presidio

Commitment: $25.08 million

Cash In: $24.68 million

Cash Out: $17.9 million

Portfolio Value: $9.17 million

IRR: 2.03%

[slide title="No. 3: Polaris Venture Partners IV"]

Vintage: 2002

Firm: Polaris Venture Partners

Commitment: $30 million

Cash In: $29.85 million

Cash Out: $7.48 million

Portfolio Value: $26.11 million

IRR: 2.46%

[slide title="No. 2: Battery Ventures VI"]

Vintage: 2000

Firm: Battery Ventures

Commitment: $29.45 million

Cash In: $29.45 million

Cash Out: $29.84 million

Portfolio Value: $7.27 million

IRR: 4.41%

[slide title="No. 1: Sprout Capital IX"]

Vintage: 2000

Firm: Sprout Group

Commitment: $11.25 million

Cash In: $11.25 million

Cash Out: $11.96 million

Portfolio Value: $3.28 million

IRR: 5.23%

[/slideshow]

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