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.

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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