Private Equity Returns Down for Fifth Straight Quarter

May 4, 2009 ( - The Private Equity industry exhibited a quarterly return decline for the fifth consecutive quarter in the fourth quarter of 2008, according to the results of the State Street Private Equity Index.

A press release said the return for the State Street Private Equity Index was -16.32% for the fourth quarter of 2008, which is a near 800-basis point decline from the prior quarter. Despite the recent declines, “Private equity funds generally held their ground better than public equities during the fourth quarter of 2008,” commented William Pryor, senior vice president of State Street Investment Analytics, in the announcement.

On an annualized basis, the State Street Private Equity Index reported a one year return of -25.76%, outperforming the S&P 500 return of -38.49% for 2008.

The Venture Capital funds in the State Street Private Equity Index demonstrated resiliency to public market volatility and declined by only -9.66%, State Street said.

Domestic funds in the Index reported a -14.69% return and International funds reported a -21.42% return in the fourth quarter of 2008. Overall, the magnitude of the return changes between third and fourth quarters for domestic funds and for international funds were relatively even.

The index is based on the latest quarterly statistics from State Street Investment Analytics’ Private Edge Group and includes more than 1,500 private equity partnerships with aggregate commitments of approximately $1.5 trillion.

class="bwcellparagraphmargin"> State Street Private Equity Indexsm

class="bwcellparagraphmargin"> Composition and long-term IRR as of December 31, 2008

Strategy Number of Funds Commitments ($B) Long-term IRR %
Buyout 701 1,058.2 10.1
Venture Capital 629 207.3 10.0
Other 192 187.1 5.3
Total 1.522 1,452.6 9.6
US only 1,238 1,102.5 9.7
International only 284 350.1 9.3