Elevation Partners, the $1.9 billion private equity fund backed by U2 lead singer Bono, had delivered only a negative return to investors in the months before it sold its maiden investment for a top line profit of $320 million three months ago. Arthur Beesley, Senior Business Correspondent, reports.

Records published by the Washington State Investment Board show that its $32.84 million investment in the fund had declined in value to $30.12 million by June 30th last after a distribution of $326,508.

This equates with a negative internal rate of return (IRR) of some 6.6 per cent under the standard measure of profitability for private equity investments.

While these are the latest publicly available figures for the Elevation performance, they predate its sale to video game publisher Electronic Arts of game producers Pendemic Studios and Bioware.

That deal last October placed a valuation of $620 million on the two companies, which were brought together by Elevation in 2005 in a $300 million transaction. This was the first time that Elevation had cashed out on an investment.

The fund owns a minority stake in Forbes magazine and 27 per cent of Palm Inc, a maker of hand-held computers.

Elevation declined to comment on the reasons for the negative IRR. This is believed likely to reflect the fee structure of private equity in which partners take fees annually, before the realisation of returns on their investments. It also reflects the fact that the fund, established in 2005, is still in a relatively early stage of operations.

The investment return data from the Washington state pension fund, first cited by Condé Nast Portfolio magazine, had improved in June from a negative IRR of 8.3 per cent three months earlier. Elevation declined to comment on its performance.