Venture capital returns declined 2.9 per cent during the first quarter of 2009, according to the Cambridge Associates US Venture Capital Index, the performance benchmark of the National
Venture capital returns declined 2.9 per cent during the first quarter of 2009, according to the Cambridge Associates US Venture Capital Index, the performance benchmark of the National Venture Capital Association.
This represented the third consecutive quarterly decline of the index but was an improvement over the previous quarter when returns fell 12.5 per cent.
Deterioration was also evident in the one, three, five and ten year time horizons for the period; the 15 and 20 year horizons showed mild improvements.
Despite the declines, the venture capital index did outperform other major market indices across all time horizons.
Astrid Noltemy, managing director who specialises in the non-marketable alternative asset area at Cambridge Associates, says: "The venture benchmark’s first quarter return reflected public market declines, the difficult economic environment, and the absence of IPOs. Recent negative returns coupled with the technology bust at the beginning of the decade have severely impacted the index’s performance since 2000. Long-term performance, however, remained strong. Yet because of the shortage of exit opportunities, venture fund managers will need either to own companies longer or potentially sell at reduced values. Either will hurt future returns."
"It is going to take a full-fledged recovery of the venture-backed IPO and acquisitions market to move these returns back to historical levels," adds Mark Heesen, president of the NVCA. "Unfortunately, this recovery seems to be a way off as the number of IPOs and acquisitions, and the pipeline of registrations remain at low levels. The venture capital industry is not alone in this predicament. We are performing better than most other asset classes, yet that is hardly a consolation for investors. Once the exit market improves, so too shall these returns."
