Venture Capital Fund Performance Continues to Strengthen Amid Improving Exit Market

ARLINGTON, VA--(Marketwired - May 29, 2014) - Venture capital fund performance continued to make gains across most time horizons as of December 31, 2013, according to the National Venture Capital Association's (NVCA) performance benchmark, the Cambridge Associates LLC U.S Venture Capital Index®. The quarterly, 1-, 3-, 5- and 10-year horizons all showed higher returns with the 15-year horizon down from the previous quarter and the 20-year horizon unchanged. Of note, the quarterly, 1-year and 5-year horizons nearly doubled to 11.9%, 27.2% and 12.5% respectively. Compared to other benchmarks, venture capital outperformed the DJIA, NASDAQ Composite and the S&P 500 during Q4 2013. Despite besting them for the quarter, the 1-, 3-, and 5-year returns were outperformed by DJIA, NASDAQ Composite and S&P 500. The 10-, 15- and 20-year venture capital performance horizons, however, continue to outperform the other benchmarks.

"Driven by a strengthening exit market, venture capital fund performance continues to improve quarter after quarter," said Bobby Franklin, President and CEO of NVCA. "This is not only good for venture investors but for the overall economy, because when venture capitalists produce good returns and distribute capital back to investors that capital can become available for reinvestment in the next crop of great entrepreneurial companies just getting off the ground." 

"While a favorable exit environment has driven strong performance for LPs for several quarters, the recent pullback on tech equities and its dampening impact on the IPO market is a stark reminder of how volatile it can be. The question is whether this is a temporary pause or something more sustained," said Peter Mooradian, Managing Director, Venture Capital Research at Cambridge Associates.

U.S. Venture Capital Index Returns
Cambridge Associates LLC U.S. Venture Capital Index® 1 for the periods ending			Qtr.		1 Year		3 Years		5 Years		10 Years		15 Years		20 Years
	December 31, 2013		11.9		27.2		15.3		12.5		9.7		22.6		30.8
	September 30, 2013		6.5		15.1		14.4		7.5		8.6		26.1		30.0
	June 30, 2013		4.3		8.9		13.5		5.7		7.8		22.8		30.1
	March 31,2013		2.5		4.9		12.0		4.8		7.4		22.8		29.6
	December 31, 2012		1.2		7.2		11.4		4.1		6.9		24.7		28.5
31-Dec-14
	U.S. Venture Capital - Early Stage Index1		13.9		27.9		16.4		12.8		9.0		96.6		45.6
	U.S. Venture Capital - Late & Expansion Stage Index1		10.6		33.3		15.2		16.9		12.4		9.5		11.7
	U.S. Venture Capital - Multi-Stage Index1		9.2		24.4		13.7		10.6		10.1		8.1		13.8
	U.S. Growth Equity1		8.4		24.8		16.1		16.5		13.6		NM		NM
	DJIA		10.2		29.7		15.7		16.7		7.4		6.5		10.2
	NASDAQ Composite*		10.7		38.3		16.3		21.5		7.6		4.4		8.8
	S&P 500		10.5		32.4		16.2		17.9		7.4		4.7		9.2

Sources: Cambridge Associates LLC, Dow Jones Indices, Standard & Poor's, and Thomson Reuters Datastream.

The Cambridge Associates LLC U.S. Venture Capital Index® is an end-to-end calculation based on data compiled from 1,493 U.S. venture capital funds, including fully liquidated partnerships, formed between 1981 and 2013, and the U.S. Growth Equity Index is based on data compiled from 153 U.S. growth equity funds, including fully liquidated funds, formed between 1986 and 2013.
¹ Pooled end-to-end return, net of fees, expenses, and carried interest.
*Capital change only.

U.S. Venture Capital mPME Analysis
CA Index			1-Year		3-Year		5-Year		10-Year		15-Year		20-Year		25-Year		30-Year
Cambridge Associates LLC U.S Venture Capital Index® 1			27.23		15.35		12.52		9.69		22.64		30.81		20.65		17.24
mPME Analysis2
S&P 500 Index			32.31		15.88		17.90		8.01		6.16		8.72		9.94		10.47
	Value-Add (bps)		-509		-54		-539		168		1,648		2,210		1,072		677
Russell 2000® Index			38.84		15.13		20.04		9.51		9.17		9.60		10.34		10.1
	Value-Add (bps)		-1,161		21		-752		18		1,348		2,121		1,032		714
Russell 3000® Index			33.49		15.9		18.65		8.45		6.7		8.91		10.1		10.45
	Value-Add (bps)		-627		-55		-613		124		1,594		2,190		1,056		679

Sources: Cambridge Associates LLC, Frank Russell Company, Standard & Poor's and Thomson Reuters Datastream.

The Cambridge Associates LLC U.S. Venture Capital Index^® is an end-to-end calculation based on data compiled from 1,493 U.S. venture capital funds, including fully liquidated partnerships, formed between 1981 and 2013.
¹ Pooled end-to-end return, net of fees, expenses, and carried interest.
² CA Modified Public Market Equivalent (mPME) replicates private investment performance under public market conditions. The public index's shares are purchased and sold according to the private fund cash flow schedule, with distributions calculated in the same proportion as the private fund, and mPME NAV is a function of mPME cash flows and public index returns. "Value-Add" shows (in basis points) the difference between the actual private investment return and the mPME calculated return. Refer to Methodology page for details.

CA Index			1-Year		3-Year		5-Year		10-Year
Cambridge Associates LLC U.S Growth Equity Index1			24.84		16.10		16.51		13.57
mPME Analysis2
Russell 2000® Index			38.92		15.33		20.02		9.88
	Value-Add (bps)		-1,408		77		-351		369
Russell 2500™ Index			36.95		15.92		21.61		10.55
	Value-Add (bps)		-1,211		18		-510		303
Russell 3000® Index			33.53		16.01		18.63		8.79
	Value-Add (bps)		-869		10		-212		478
Russell Midcap® Index			34.99		15.55		22.11		10.74
	Value-Add (bps)		-1,015		55		-560		283
S&P 500 Index			32.34		15.97		17.92		8.37
	Value-Add (bps)		-750		13		-141		520
Constructed Index: NASDAQ Composite Price Index/ NASDAQ Composite Total Return3			39.69		17.2		22.31		10.01
	Value-Add (bps)		-1,485		-110		-580		356

Sources: Cambridge Associates LLC, Frank Russell Company, Global Financial Data, Inc., Standard & Poor's and Thomson Reuters Datastream.

The index is an end-to-end calculation based on data compiled from 153 U.S. growth equity funds, including fully liquidated partnerships, formed between 1986 and 2013.
¹ Pooled end-to-end return, net of fees, expenses, and carried interest.
² CA Modified Public Market Equivalent (mPME) replicates private investment performance under public market conditions. The public index's shares are purchased and sold according to the private fund cash flow schedule, with distributions calculated in the same proportion as the private fund, and mPME NAV is a function of mPME cash flows and public index returns. "Value-Add" shows (in basis points) the difference between the actual private investment return and the mPME calculated return. Refer to Methodology page for details.
³ Constructed Index: Data from 1/1/1986 to 10/31/2003 represented by NASDAQ Price Index. Data from 11/1/2003 to present represented by NASDAQ Composite.

Vintage Year Return Ratios

The following chart lists the ratio between the dollars paid into venture capital funds by limited partners (LPs) and the dollars distributed to them by vintage year. For example, the 2002 vintage year funds have distributed cash of 0.68 times the amount of capital paid in by LPs and the residual value is 0.35 times the paid-in capital; the total value multiple is therefore 1.03 times. It is important to note that the residual value is unrealized and will change as companies exit the portfolio, are re-valued, or are written off. The 2007 and 2010 vintage year funds show the most positive ratio of the last decade, with returns at 1.73 and 1.69 (respectively) the capital contributed by LPs, should those funds realize the value of what remains in the portfolio. More recent vintage years have yet to return significant cash to LPs as most funds do not have the opportunity to begin returning capital until after year five.

Vintage Year		Distribution to Paid in Capital (DPI)		Residual Value to Paid in Capital (RVPI)		Total Value to Paid in Capital (TVPI)
1981-1995		3.39		0.01		3.40
1996		4.89		0.02		4.91
1997		3.08		0.03		3.11
1998		1.44		0.06		1.50
1999		0.85		0.12		0.97
2000		0.79		0.26		1.05
2001		0.82		0.35		1.17
2002		0.68		0.35		1.03
2003		0.88		0.77		1.65
2004		0.79		0.80		1.59
2005		0.45		0.86		1.31
2006		0.46		1.01		1.47
2007		0.40		1.33		1.73
2008		0.28		1.24		1.52
2009		0.21		1.31		1.52
2010		0.13		1.56		1.69
2011		0.04		1.14		1.18
2012		0.00		1.10		1.10
2013		0.00		0.97		0.97
Total All Vintage Years		1.10		0.55		1.65

Additional Performance Benchmarks

To view the full, comprehensive report, which includes tables on additional time horizons, vintage years, and industry returns, please visit the Cambridge Associates or NVCA websites.

Cambridge Associates derives its U.S. venture capital benchmarks from the financial information contained in its proprietary database of venture capital funds. As of December 31, 2013, the database included 1,493 venture funds formed from 1981 through 2013.

About NVCA

Venture capitalists are committed to funding America's most innovative entrepreneurs, working closely with them to transform breakthrough ideas into emerging growth companies that drive U.S. job creation and economic growth. As the voice of the U.S. venture capital community, the National Venture Capital Association empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community's preeminent trade association, the NVCA serves as the definitive resource for venture capital data and unites its nearly 400 members through a full range of professional services. For more information about the NVCA, please visit www.nvca.org.

About Cambridge Associates

Founded in 1973, Cambridge Associates is a provider of independent investment advice and research to institutional investors and private clients worldwide. Today the firm serves over 950 global investors and delivers a range of services, including investment advisory, outsourced portfolio solutions, research services and tools (Research Navigator^sm and Benchmark Calculator), and performance monitoring, across asset classes. The firm compiles the performance results for more than 5,700 private partnerships and their over 65,000 portfolio company investments to publish its proprietary private investments benchmarks, of which the Cambridge Associates LLC U.S. Venture Capital Index® and Cambridge Associates LLC U.S. Private Equity Index® are widely considered to be among the standard benchmark statistics for these asset classes. Cambridge Associates has been selected to provide data and to develop and maintain customized industry benchmarks for a number of prominent industry associations, including the Institutional Limited Partners Association (ILPA), Australian Private Equity & Venture Capital Association Limited (AVCAL); the African Venture Capital Association (AVCA); the Canada Venture Capital and Private Equity Association (CVCA);the Hong Kong Venture Capital and Private Equity Association (HKVCA); the Indian Private Equity and Venture Capital Association (IVCA); the New Zealand Private Equity & Venture Capital Association Inc. (NZVCA); the Asia Pacific Real Estate Association (APREA); and the National Venture Capital Association (NVCA). Cambridge also provides data and analysis to the Emerging Markets Private Equity Association (EMPEA). Cambridge Associates has more than 1,100 employees serving its client base globally and maintains offices in Arlington, VA; Boston; Dallas; Menlo Park, CA; London; Singapore; Sydney; and Beijing. Cambridge Associates consists of five global investment consulting affiliates that are all under common ownership and control.

For more information about Cambridge Associates, please visit www.cambridgeassociates.com.