Cross Atlantic isn't unusual. Venture capital firms typically repay investors in a five- to 10-year cycle, or never. As returns dried up in the dot.com bust, the big money moved on, to buyout funds, real estate, and commodity speculation.
But SERS' politically appointed board is patient. On June 8, SERS trustees voted to invest another $20 million in Cross Atlantic Technology Fund III, even after the firm tied up SERS' millions for a decade, without profit, while still collecting management funds - $159,000 from SERS last year.
Why? Things are looking up, SERS spokesman Robert Gentzel told me. He says recent deals by Cross Atlantic have finally boosted the value of SERS' first investment past its original $20 million, "and we've now recovered all our initial investment, plus about $1.5 million."
That works out to a total return that averages less than 1 percent a year, if you don't count inflation, or the opportunity cost of what the state would have earned by sticking those millions in, say, U.S. Treasury bonds.
But SERS hopes for bigger profits to come. Gentzel says SERS' "alternative investment consultant," Cambridge Associates, "tells us [Cross Atlantic] ranks among the better-performing venture funds" still around from the dot.com days. PSERS, the teachers' fund, is undecided whether to invest with Cross Atlantic again.
I asked Don Caldwell, the gravel-voiced Cross Atlantic founder, how he won another chance with SERS. "Private equity is a long-term proposition," he told me.
