State Street Reports Private Equity Returns Have Dipped During Crisis

Financial services provider State Street Corporation has just released data that it’s State Street Private Equity Indexes’ IRR dropped into negative territory (-1.51%) for the most recent quarter. This shouldn’t come as a surprise as economic conditions have worsened and many of the lower-tier firms are unable to keep up.

The index is based on the latest quarterly statistics from State Street Investment Analytics’ Private Edge Group and includes more than 1,400 private equity partnerships with a total fund size of $1.3 trillion.

Interestingly the report points out that the first-half of this year marked the first back-to-back quarters of negative returns for the Index since the downturn which occurred between October 2000 and March 2003, The results of which was an Index decline of 31.5% and took 7 quarters to reverse. This figure is comparatively strong compared to the S&P 500 downturn of 44.7% from September 2000 through September 2002 which took approximately 4 years to reverse.

The following figures are the State Street Private Equity Index composition and long-term IRR results as of the end of Q2 2008:

Strategy Number of Funds Commitments ($B) Long-term IRR%
Buyout

655

941.9

14.9

Venture Capital

591

192.0

13.1

Other

182

163.9

12.4

Total

1,428

1,297.8

14.4

US only

1,173

1,006.0

13.6

International only

255

291.8

19.2

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