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Connecticut’s Big Bet with Venture Funds of Funds

Venture capital is no walk in the park. This cliché certainly applies to the selection of funds in which to invest money. It might also refer to picking portfolio companies with real long-term value.

Connecticut’s public retirement and trust funds are a case in point for the former. The state’s investment council, part of the treasurer’s office, has dabbled in venture capital over the past couple decades with mixed results. It owns 13 funds, including massive investments in three fund of funds all managed by the same firm, according to recently released portfolio data current through June 2011. And it boasts a respectable overall 12.8% IRR.

But eight of the 13 funds have negative IRRs, sometimes substantially so. If not for the three fund of funds and their positive returns so far, the state’s program would look decidedly unimpressive, an analysis of the portfolio shows.

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