State Street’s GX Private Equity Index Shows Modest Rebound After Q3 2015 Drop

“Private equity funds posted a modest recovery in the fourth quarter after a brief drop in the previous quarter,” said Will Kinlaw, senior managing director and global head of State Street Associates, part of State Street Global Exchange. “Overall we have seen relatively steady performance in private equity investments for the past few years. The biggest driver in the fourth quarter rebound was the continued trend of impressive growth by venture capital funds, which haven’t posted a negative return since 2012.”

The Index is based on directly sourced limited partnership data and represents more than $2 trillion in private equity investments, with more than 2,500 unique private equity partnerships, as of March 31, 2016.

“Private equity returns for 2015 posted a 6.55 percent return in the US, compared to negative returns of both the S&P 500 and Russell 3000®,” continued Kinlaw.

Additional Fourth Quarter Highlights Include:

• Capital deployment (capital drawdowns for new investment) slowed in 2015 relative to the prior year, but showed steady growth in the fourth quarter and remained at a healthy level.
• Private equity funds in the US posted a 0.42% return in the fourth quarter, an increase from -1.43% in the third quarter. For the one year return, US private equity funds recorded 6.55%.
• European-focused private equity funds recorded a return of 1.94% in the fourth quarter against a relatively fragile economic backdrop.
• Private equity funds outside of the US and Europe, primarily made up of emerging market funds, remain quite volatile with a quarterly performance of 3.63% in Q4 2015, up from -3.13% in Q3.

“The plunging price in energy and commodities continued to have a significant impact on the performance of private equity, and specifically buyout funds in 2015,” said Anthony Catino, managing director of State Street’s alternative investment solutions business. “However, we have also seen signs that some private equity firms are looking for opportunities to pick up assets and entire companies, with the hope to take advantage of cheap valuation.”