State Street Reports Private Equity Returns Have Dipped During Crisis

October 17, 2008

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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Small and Lower Mid-Market Private Equity Report for Q2 2008

September 4, 2008

The folks at GF Data Resources have released their quarterly report analyzing deals valued between $10M and $250M.  Overall the firms they contacted reported 23 such transactions fitting their criteria, up from 14 in the first quarter.  However that total of 37 for the first half of 2008 is off from 65 in the first half of 2007, and 48 in the second half of last year.

The report shows a drop in average valuation multiples from 6.3x to 5.7x which is evident by the debt to EBITDA ratio declining from 4.0x in the first half of 2007 to an average of 3.5x since then.  Equity is now taking up a greater share of capital coming in at 41.6% compared with 39.3% a year ago (which is actually not as big a bump as I had anticipated reading).  Additionally, there’s proof that the oft spoken of “Flight to Quality” is actually happening.


Q2 2008 Financing Trends in Venture Capital

August 16, 2008

In the realm of venture capital the San Fransisco Bay-area is seen as the international trend setter.  In light of this little fact it’s always interesting to look at how VC deals are trending in Silicon Valley.  Tech-focused law firm Fenwick & West has done just that with their latest study:

What’s interesting is that valuations continue to soar in both Web 2.0 and Cleantech despite tricky exit opportunities in both sectors.  It’s a quick read and well worth it.