I often hear from LPs that despite the ongoing credit crisis, they’re still cool on venture capital as an asset class. Buyouts have treated them way too well in recent years; most see VC as an overcrowded field with lackluster results. Nothing new there. Even still, big pension systems typically pay some attention to venture capital firms.
That’s hardly the case with Washington State Investment Board, a $63 billion pension that, judging by its publicly available IRR data, seems to have decided some time ago to give the venture industry the kiss-off.
The WSIB won’t talk to me — calling its strategy “proprietary information that could influence other investor decisions and jeopardize our fiduciary responsibility to maximize returns” etc., yawn — but according to its most recent IRR report (which dates back to last September) it’s given just four venture capital firm fresh capital since –gulp — 2005. More, three of them are large firms that have branched out well beyond early-stage venture investing.
In 2005, it gave Menlo Ventures a $150 million commitment for its $1.2 billion Menlo Ventures X fund. When New Enterprise Associates, once an early stage stalwart, closed on a stage-agnostic $2.5 billion fund in 2006, $50 million of it came from WSIB’s giant coffers. And it committed $30 million to Oak Investment Partners’ 12th fund, which closed with $2.5 billion in 2006.
The only pure early stage firm to attract capital from WSIB in recent years is OVP Venture Partners, which locked down $40 million from the pension for its seventh, $254 million fund. And that was back in 2005, when the world was still blissfully unaware of Ashley Simpson (but not, sadly, so-called “intelligent design”).
That commitment had a lot to do with OVP’s regional focus, too. OVP is based in Kirkland, Wash., and chiefly invests in startups based in the Pacific Northwest, making it a natural fit for WSIB, which does what it can to support the home state.
Meanwhile, WSIB commits to megafund after megafund, from TPG Partners, raising around $18 billion for its newest fund, to Madison Dearborn Capital Partners, in the market now for a fund with a target of $10 billion.
I understand that like a lot of other enormous institutions, WSIB has to deploy boatloads of capital every time it makes an investment, especially since bumping its already aggressive 17 percent allocation to private equity to a whopping 25 percent last year. I also trust that WSIB knows what it’s doing. Last year, it enjoyed a nearly 30 percent return, which is mind-blowing when you think about how much money it puts to work. Its ten-year return is around 16 percent, which is just as impressive.
I could also be missing some investments. WSIB spokeswoman Liz Mendizabel tells me the pension has made other, smaller venture capital investments through its discretionary venture capital manager, Irvine, Calif.-based Pathway Capital Management, though she declined to name them, and Pathway hasn’t returned my request for more information.
I guess what I’m wondering is: has WSIB made enough bets to counter what appears to be some downright disdain for VC, a class that, pre-2005, WSIB actively supported? I hope so, because I find the publicly available numbers vaguely depressing. And curious. What happened, WSIB? What do you think, readers?