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

Plunging Energy Prices Create Strong Headwinds for Buyout Funds in 2015

Thursday, May 26, 2016 12:00 pm EDT

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Find out what's behind #PrivateEquity’s modest uptick. #SSGX

BOSTON--(BUSINESS WIRE)--State Street Corporation (NYSE:STT) today announced the results of its GX Private Equity IndexSM, a benchmark for comparative analysis of private equity performance, which includes a comprehensive data set dating back to 1980. In the fourth quarter of 2015, the index saw an overall return of 1.11 percent.

“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) remained steady in 2015 relative to 2013 and 2014. However, in Q1 2016 they dropped to their lowest level since early 2009.
  • 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.

“When you look at three-year performance track records, you see that venture capital funds have delivered outsized returns in recent years while buyout and private debt funds showed signs of slowing down toward the end of 2015,” said Kinlaw.

“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.”

For additional insights, or to learn more about the GX Private Equity Index please visit http://www.ssgx.com/peindex.

About State Street

State Street Corporation (NYSE: STT) is one of the world's leading providers of financial services to institutional investors, including investment servicing, investment management and investment research and trading. With $27 trillion in assets under custody and administration and $2 trillion* in assets under management as of March 31, 2016, State Street operates in more than 100 geographic markets worldwide, including the US, Canada, Europe, the Middle East and Asia. For more information, visit State Street’s website at www.statestreet.com.

* Assets under management include approximately $32.6 billion as of March 31, 2016, for which State Street Global Markets, LLC, an affiliate of SSGA, serves as the marketing agent.

Past performance is no guarantee of future results.

Performance of an index is not illustrative of any particular investment. It is not possible to invest directly in an index.

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Exp. Date - 05/31/2017

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