An Ohio state agency released data Friday that shows buyout funds outperformed venture funds in its private equity portfolio, information rarely available to the state employees who benefit from the investments.

The reporton firm-by-firm investment returns offers an unusual glimpse into the performance of buyout and venture capital firms, which typically keep a close guard on such data and have fought some high-profile legal battles to keep other pension funds from publicly releasing such figures (see Ohio, VCs Wrangle Over Data).

Facing pressure from VCs, the bureau stopped short of releasing data that shows valuations of individual companies in which the bureau’s private equity partners are invested. The bureau has asked the courts whether it can release such information (see Ohio Portfolio Data Angers VCs).

But Friday’s move shed plenty of light. While a number of buyout funds in which the bureau had invested created double-digit returns on the pension fund’s investments, most venture funds in the portfolio registered negative returns.

Does that mean the bureau’s venture investments were bum deals? Not necessarily, said Emily Mendell, the National Venture Capital Association’s vice president of strategic affairs and public outreach.

Her response suggests that one reason venture firms have fiercely opposed the release of performance data is because they fear that negative returns in the early years of a fund may eclipse the gains investments make in later years, which is typically when venture funds harvest their big wins.

Dangerous Information

“When it gets out there, [some of this information] is dangerous because people don’t understand it,” said Ms. Mendell. “You need to give these funds time to make the returns they have historically made.”

It can take from five to seven years for venture fund returns to turn positive—well into the 10 years that represents the typical life of a venture fund, she added. “We typically don’t look at anything under five years as being meaningful.”

That’s just about the time frame covered in the Ohio data, which includes just two funds closed before 2000 among the 60 buyout, mezzanine, and venture capital funds listed. The bureau’s portfolio also includes eight funds-of-funds, which operate similarly to mutual funds, but in the private equity industry.

The bureau’s private equity portfolio had a market value of $330 million as of March 31, 2005, according to today’s report, which was based on a review of the valuations of the bureau’s private equity funds by Ennis Knupp & Associates, a Chicago consultant group.

The bureau had also received distributions of $97.7 million as of the report’s closing date, bringing its total capital value to $427.8 million. Those investments yielded annualized returns of 3.16 percent for the bureau.

Return Data

The bureau saw its biggest gain from investments in a fund run by Quad-C Partners, a Charlottesville, Virginia-based buyout firm to which the Bureau has made a $15-million capital commitment.

As of March 31, Quad-C had invested $8.2 million of that amount and paid back $1.9 million to the bureau, putting the total capital value of the investment at $15.6 million and giving the bureau a 90 percent return on investment. The firm also registered the highest annualized rate of return among the bureau’s portfolio funds, at 40 percent.

Among venture funds, Athens, Ohio-based Adena Ventures registered the highest annualized rate of return, at 13 percent on a 2002-vintage fund. The only other venture fund to show a positive rate of return for the report’s time period was Nashville- and Dallas-based Pharos Capital Partners, which registered a 2.7 percent annualized return on a 2000-vintage fund.

“Pharos is pleased to be a top-quartile performer in the asset class and to have created value for the Ohio retirement funds and its other institutional investors,” said Pharos spokesperson Owen Blicksilver.

Still, with the National Venture Capital Association claiming more than 400 members, the Ohio data shows only a small slice of the venture and private equity world.

Over the last ten years, the NVCA’s data shows venture firms outperforming private equity firms that do buyouts and mezzanine investing. Ten-year returns at venture firms were almost 26 percent compared with 9 percent for buyout firms, Ms. Mendell said (see VC Returns Plummet 147%).