Venture Capital Funds See Red For Eighth Straight Quarter

April 21, 2003 (PLANSPONSOR.com) - Annual private equity returns continued to be negative for the eighth straight quarter, as three-year private equity returns slipped to a negative 5.4%.

Annual returns were in the red for all seven venture capital fund types, as the group was down 11% for the year.   The drop off is due in large part to the continued decline of high technology company valuations and the lack of exit opportunities , according to the year-end 2002 Private Equity Performance Index results released by Thomson Venture Economics and the National Venture Capital Association.

Leading the decline this year was Early/Seed funds, down 27.6%; followed by Balanced and Later Stage funds, 22.8% and 15.7% lower, respectively.   The remaining funds, whose returns are derived from distributions back to investors and interim valuations, were:

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  • All Venture down 23.3%
  • All Buyouts down 5.5%
  • Mezzanine down 1.7%

However, this performance must be taken in context that the overall equity markets have all been adversely impacted.   Private equity performance has outpaced NASDAQ, which is the venture industry’s most relevant public market benchmark.  

“The two and a half year downturn in venture and private equity returns are not surprising, given what has been going on in the public markets. The inevitable winnowing process that this will create will ultimately leave a much leaner but probably more robust investment market for private equity investing,” according to Jesse Reyes, Vice President at Thomson Venture Economics.

Generally venture funds are expected to generate 15% to 20% returns over the life of the fund.   However, the venture capital industry is in a state of flux with falling portfolio company valuations and limited exit opportunities as seen when early performance of recent funds are compared to early performance of earlier vintage year funds. For example, after three years of activity, 1996 vintage year funds had returned 1.12 times the original investment to the investors. In addition, companies remaining in the portfolios had a remaining combined valuation of 3.92 times the original investment. The consensus across the industry is that the 1996 vintage year funds as a group exceeded all expectations.

In contrast to the 1996 vintage year funds the younger funds of today are challenged. The vintage year 1998 funds have returned $0.83 cents on the original investment dollar and the remaining portfolio companies have a valuation of $0.93 cents on the dollar at the three-year mark. The vintage year 1999 funds have returned 20 cents on the original investment dollar with remaining portfolio companies having a valuation of 43 cents on the dollar at the three-year mark.

Sky Financial Group Adds Retirement Services Division

April 18, 2003 (PLANSPONSOR.com) - Plan sponsors in small- and mid-market companies will have a new retirement plan services provider catering to their needs from Sky Financial Group, Inc.

Sky Retirement Services is the new business unit offering sales and service related to 401(k), profit sharing, pension plans and other related institutional retirement services and comes from the combination of three Sky subsidiaries:   Sky Trust, Sky Insurance and M&E Investments.   In creating this new division, Sky has consolidated operational and support functions common to each of the financial services subsidiaries to provide a support structure to the sales and client management functions across the entire organization, according to a news release.

As a part of this move, the Pepper Pike, Ohio-based company also has enhanced its suite of retirement products to include new proprietary and non-proprietary retirement solutions. The company now offers a line of retirement products suited to commercial, insurance and private banking clients.

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Clients will be able to access Sky Retirement Services through any of the company’s banking, trust, investment or insurance offices located throughout Sky’s footprint, which includes Ohio, northern Indiana, western Pennsylvania, southeast Michigan and northern West Virginia.

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