Fund Performance: LACERS Venture Portfolio Shows Big Winners and Losers

The Los Angeles City Employees’ Retirement System has been a steady investor in venture capital over the past eight years. It results would be quite impressive, if not for a few 2006 and 2007 bets that have yet to prove themselves.

The portfolio is managed by Hamilton Lane and shows the broad dispersion typical of venture performance and includes several big winners. The most obvious is Spark Capital II, which has returned almost all its capital and boasts a net IRR of 57.74%, as of June.

Also at the head of the class are Khosla Ventures IV and New Enterprise Associates 13, both young funds that nevertheless claim attractive IRRs, according to a November portfolio report. The pension fund has money in DFJ Elements II and Sterling Venture Partners II, which have yet to return much of it, but look promising.

Holding the portfolio back are several bets from 2006 and 2007 that are not living up to expectations, the report shows. For instance, NGEN II from 2006 faces the difficult headwinds of cleantech and has an IRR of -35.4 percent. StarVest Partners II and DFJ Element I also have yet to generate strong returns.

StarVest Partners II has an IRR of -9.57%, as of June, while DFL Elements I has an -8.49% IRR, the report shows.

Several other funds at the bottom of the performance list—Polaris Venture Partners VI, Angeleno Investors III and Spark Capital III—are too young to have meaningful numbers. Their vintages are 2010 and 2011.

In the accompanying chart, VCJ lists the pension fund’s venture commitments since 2004 with distributions and IRRs. LACERS has a target allocation to private equity of 12% and an exposure of 11.7%, as of June, with $2.4 billion committed. Of these investments, 14% are allocated to venture capital.