Investing April 10, 2001

VC Funds Down 10.2% in Q4

April 10, 2001 (PLANSPONSOR.com) - US venture capital funds suffered their first quarterly loss since 1998, falling 10.2% over the final three months of 2000, according to preliminary figures from Venture Economics
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It was the fourth quarter in a row where the investment class had suffered declining returns, according to Bloomberg.

The figure was based on aggregate cash flows of the pooled funds of 959 funds with non-annualized returns ranging from gains of 11.9% to losses of 88% in the fourth quarter.

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Although results vary widely and unrealized gains could change over time, the return illustrates the impact of tumbling new economy stocks on venture capital fund investors.

The NASDAQ’s 31% fall over the same period made raising private financing for technology related enterprises more challenging and had forced venture capitalists to rein in investment, which took a toll on returns.

According to numbers from Venture Economics:

  • venture capital funds returned a preliminary 32.5% over 2000, compared to 165.3% in 1999
  • the average for returns in these funds was 19.6% over the last 20 years
  • only six quarters have seen negative returns since 1984

All returns are net to investors after management fees and the venture firms’ share of investment gains.

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