While some groups have consistently produced rates of 20 to 30 per cent, others have been significantly negative.
The UK Venture Industry Review, published by Initiative Europe, analyses the structure of the venture capital industry and looks ahead to structural change.
It says investments made in UK funds in the 1980s were based on the promise of super-normal returns of more than 30 per cent.
Such promises were based on erroneous data about US performance and some early experience of British buyouts.
Institutions believe that they have been 'mugged' on investment terms by a number of funds and remain unconvinced about the value added by some management teams.
Despite such disenchantment, the report shows that venture capital groups in the market are seeking funds of pounds 1.25m, more than three times the amount raised in 1991 or 1992.
Only venture capital managers who add value will succeed in raising money.
The report says: 'The knell is sounding for independent fund managers who depend on intermediaries for deal flow and who cannot prove they add value through sourcing and managing exceptional deals.'
Venture capital is unpopular with many entrepreneurs. The report suggests that greater availability of long-term bank debt could have a significant impact on the venture capital market.
Looking beyond 2000, the report predicts that many institutions will come in and out of the venture capital market at exactly the wrong points in the cycle.
It forecasts that a shift in fashion in favour of venture capital will result in massive influxes and reduced performance, and that this will lead to an exodus and improved performance.