State Street’s GX Private Equity Index Again Shows Strong Performance in Second Quarter 2017

Driven by a Weak US Dollar, European Private Equity Funds Post 10.5 Percent Gain

The State Street Global ExchangeSM Private Equity Index (GXPEI) ended the second quarter of 2017 with continued strong performance of 3.96 percent, in line with the 3.95 percent return posted in the first quarter.

The GXPEI is based on directly-sourced limited partnership data and represents more than $2.5 trillion in private equity investments, with more than 2,800 unique private equity partnerships, as of June 30 2017.

“European funds had a very strong quarter, partly driven by a weaker US dollar,” said Will Kinlaw, senior managing director and global head of State Street Associates®, a division of State Street Global Exchange. “However, setting aside the foreign exchange impact, the European funds still achieved a 3.72 percent quarterly return in Euro, outperforming the US private equity funds in local currency terms. Interestingly, the GXPEI confirms the European recovery we have seen from public market in 2017.”

Second Quarter Highlights Include:

• Buyout funds posted a 4.73% gain in Q2, extending its streak as the leading segment among the three main strategies to six consecutive quarters. Private Debt funds maintained a steady gain of 3.08% while Venture Capital fund returns dropped to 1.84%.

• European-focused private equity funds experienced a 10.54% quarterly gain in USD-denominated terms (3.72% in EUR-denominated IRR). US-focused funds returned 2.62%, while funds focused on the rest of the world gained 3.05%.

• Among all sectors covered, industrials-focused funds saw the highest return, with a 4.73% gain, followed by consumer-focused funds with a return of 4.36%. Energy-focused funds posted a narrow gain of 0.26%, down from the peak of 7.79% in Q2 2016.

• Q2 2017 saw higher volumes in both cash contribution and distribution compared to the same period of 2016. However, distribution remained at a higher level than contribution, thus investors received positive net cash flows in Q2.

“Private Equity fundraising has been increasing in recent years, however firms have been slow to deploy their capital in the first half of the year due to delays in the US tax reform and political uncertainty. Perhaps such uncertainty may create opportunities for Buyout funds,” said Anthony Catino, managing director, Alternative Investment Solutions for State Street.