The lack of initial public offerings on Wall Street and a decline in the value of mergers-and-acquisitions are wreaking havoc on venture capital returns.

, Thomson Reuters and the reported Monday.

The economy’s slide into a recession last year also drove down venture returns across the other time frames measured by Thomson Reuters and the NVCA, with the exception of 20-year returns. They remained flat.

And 2009 doesn’t appear as if it will be much better, according to NVCA President Mark Heesen.

"The next year will be challenging for the venture capital industry as the shuttered IPO
window and lower M&A valuations will take a toll on performance numbers in the short
term,” Heesen said.

One-year returns plunged 20.6 percent in early/seed VC deals, 26.9 percent in the balanced category and 6.8 percent in late stage. Overall, fourth quarter VC performance fell 20.9 percent, a decline of 18.8 percentage points from the third quarter.

Losses were even worse in public markets where the Nasdaq lost 38.1 percent of its value and the S&P dropped 36.1 percent, Thomson Reuters and the NVCA noted.

However, returns remained positive – if at a smaller rate – in the three-year, five-year and 10-year windows for venture capital.

Overall, three-year values should a 4.2 percent return (down 2.1 percentage points); five year values reached 5.4 percent (down 2 percentage points); 10-year deal values showed a 15.5 percent return (down 1.6 points); 20-year deals came in at a 17 percent return, the same as the prior quarter.

Venture returns will be further hurt this year as returns from the tech market boom year of 1999 are removed from the 10-year category, the NVCA noted.

“Thomson Reuters checks the stock values pf various VC fund pools,” the NVCA’s Emily Mandell told Local Tech Wire. “1999 was an excellent year, as was most of 2000. But those 10-year figures will be replaced in 2009 by not-so-good years.”

The 1999 returns will still be factored into 20-year percentages, she noted.

In a statement, Heesen said that the NVCA still believes “that venture capital will continue to perform well relative to other alternative investments and once the exit market improves, so too should return numbers.”