Key Takeaways
- • UC Investments, managing the University of California's $152 billion in endowment and retirement accounts, has invested more than $3.4 billion in venture capital funds since 2000 but had received only $2.6 billion in distributions through mid-2022, according to an Insider analysis of records obtained via a Public Records Act request.
- • UC Investments reports $1.9 billion in unrealized gains on its VC portfolio, though those valuations from June 2022 may be optimistic given significant markdowns in the third and fourth quarters of 2022.
- • Between 2014 and 2015, under CIO Jagdeep Singh Bachher, the endowment sold stakes in nearly two dozen VC funds, including Bessemer, DCM, GGV, Insight, IVP and Khosla; several funds the university sold would have outperformed benchmarks had they been held to close, per sources.
- • Newer university-affiliated vehicles have been weak: UC Investments has put more than $231 million into Bow Ventures Fund I with less than $70,000 returned, and $61 million into four House Fund vehicles with no distributions to date.
- • Even for the 2000-2018 period, UC Investments received less in cash than it paid in, and UC Investments declined to comment.
Summary
An Insider analysis reports that UC Investments, which manages the University of California's $152 billion in endowment and retirement accounts, has invested more than $3.4 billion since 2000 in venture capital funds managed by firms including Khosla Ventures, Insight Partners and Lightspeed Partners. Through the middle of 2022, the university had received $2.6 billion in distributions from those funds, meaning that, so far, an index fund would have performed better. The article notes the S&P 500 has delivered a compounded annual growth rate of 10.7% over the last 30 years. The returns were obtained through a Public Records Act request, offering a rare look at data VC funds are generally not required to disclose. UC Investments, led by Jagdeep Singh Bachher since 2014, declined to comment.
UC Investments says its VC portfolio carries $1.9 billion in unrealized gains, but the article cautions that valuations as of June 2022 could be optimistic, given severe markdowns in the third and fourth quarters of 2022. Venture is a long-duration asset class, and the endowment takes a 20-year view, so interim results are not conclusive. Even so, the analysis found that for 2000-2018, excluding younger funds, the university still received less cash than it paid in.
The report attributes the shortfall to a mix of fund selection, timing and a decision to sell many holdings early. Between 2014 and 2015, the endowment sold stakes in nearly two dozen VC funds, including Bessemer, DCM, GGV, Insight, IVP and Khosla, some only a year or two old. Per university documents and a person familiar with the funds, UC Investments' 2011 and 2013 Insight funds reported paid-in multiples of 1.52x and 1.26x, but would have reached about 2.4x and 2.1x had they been held through 2022. Similarly, Lightspeed's 2006 and 2008 funds would have outperformed benchmarks had they been held to close, according to a person with direct knowledge. Bachher also sold more than $1 billion of private equity holdings on secondary markets to reduce fees.
The university's direct and affiliated venture programs have been mixed. An in-house fund, UC Ventures, which received hundreds of millions of dollars, was scrapped about two years later. Since 2016, UC Investments has invested more than $231 million in Bow Ventures Fund I, a joint venture with Bow Capital, receiving less than $70,000 in distributions; the fund is marked at $372 million, and the university committed another $100 million to Bow Ventures Fund II last year. Starting in 2016, it invested $61 million in four funds managed by The House Fund, none of which has returned distributions. On the positive side, a 2018 Vertical Venture Partners fund has returned more than three times the university's investment. UC Investments has also invested more than $800 million in Sequoia Capital funds since 2018, with about half posting losses, per earlier Insider reporting.
UC Investments does not separately disclose VC performance. Its private equity portfolio, of which venture is a small part, has returned 20.8% over three decades, driven by firms such as Warburg Pincus and KKR, compared with 8.3% for its public market investments.
UC Investments says its VC portfolio carries $1.9 billion in unrealized gains, but the article cautions that valuations as of June 2022 could be optimistic, given severe markdowns in the third and fourth quarters of 2022. Venture is a long-duration asset class, and the endowment takes a 20-year view, so interim results are not conclusive. Even so, the analysis found that for 2000-2018, excluding younger funds, the university still received less cash than it paid in.
The report attributes the shortfall to a mix of fund selection, timing and a decision to sell many holdings early. Between 2014 and 2015, the endowment sold stakes in nearly two dozen VC funds, including Bessemer, DCM, GGV, Insight, IVP and Khosla, some only a year or two old. Per university documents and a person familiar with the funds, UC Investments' 2011 and 2013 Insight funds reported paid-in multiples of 1.52x and 1.26x, but would have reached about 2.4x and 2.1x had they been held through 2022. Similarly, Lightspeed's 2006 and 2008 funds would have outperformed benchmarks had they been held to close, according to a person with direct knowledge. Bachher also sold more than $1 billion of private equity holdings on secondary markets to reduce fees.
The university's direct and affiliated venture programs have been mixed. An in-house fund, UC Ventures, which received hundreds of millions of dollars, was scrapped about two years later. Since 2016, UC Investments has invested more than $231 million in Bow Ventures Fund I, a joint venture with Bow Capital, receiving less than $70,000 in distributions; the fund is marked at $372 million, and the university committed another $100 million to Bow Ventures Fund II last year. Starting in 2016, it invested $61 million in four funds managed by The House Fund, none of which has returned distributions. On the positive side, a 2018 Vertical Venture Partners fund has returned more than three times the university's investment. UC Investments has also invested more than $800 million in Sequoia Capital funds since 2018, with about half posting losses, per earlier Insider reporting.
UC Investments does not separately disclose VC performance. Its private equity portfolio, of which venture is a small part, has returned 20.8% over three decades, driven by firms such as Warburg Pincus and KKR, compared with 8.3% for its public market investments.
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