Venture Capital Is Worst-Performing Asset for Calpers

  • Pension fund reduces VC fund commitments to 5 percent
  • It also sold 46 private equity fund stakes worth $2 billion

Venture capital was the worst performer for the California Public Employees’ Retirement System among its private-equity investments.

Returns for VC holdings at the nation’s largest public pension fund were 7 percent over the last five years and 5.6 percent over the last decade, according to a presentation prepared for the board. The investments lagged behind all other private-equity assets for Calpers, partly due to “modestly decreased” activity in venture-backed initial public offerings, the presentation said.

Calpers, which manages about $303 billion, has pared back investments in VC funds to represent 5 percent of its private-equity portfolio. Calpers has been working toward reducing its VC assets to 1 percent of its total because it’s been rejected by many top firms it wants to invest in. In 2012 when VC holdings were 7 percent of the portfolio, a Calpers executive said VC firms often prefer to keep out investors that are required by law to publicly disclose details about fund performance.

Khosla Ventures is Calpers’s largest venture bet, accounting for $212 million, according to the presentation for the pension fund’s investment committee. Calpers has also committed $196 million to CDH Ventures Partners, $117 million to VantagePoint Venture Partners, $102 million to Essex Woodlands Health Ventures and $76 million to Clarus Ventures.

While Calpers is pulling back, others are pouring money into VC funds. The industry is on track to have its best year in at least a decade after 134 venture firms raised $22.5 billion during the first half of 2016, according to research firm PitchBook.

Calpers, which is responsible for the retirement savings of more than 1.7 million members, sold assets in 46 funds totaling more than $2 billion during the first half of the year, though the report compiled by the Pension Consulting Alliance didn’t specify the names of the funds.

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