State Street Q210 PE Index Loses Ground

October 22, 2010 ( – The State Street Private Equity Index for the quarter ended June 30, 2010, posted a 0.65% return, 157 basis points lower than the first quarter of 2010 return and 483 basis points lower than a year earlier.

A State Street news release said the second quarter of 2010 return for the European and Rest of World regions were -3.14% and 0.48%, respectively, with both reflecting a significant decrease from prior quarter.

From third quarter 2009 to second quarter 2010, all Private Equity recorded a 19.2% one-year end-to-end return and Mezzanine and Distressed Debt funds combined recorded a 27.9% return for the same one-year investment time period, continuing to perform better than other investment strategies, State Street said.

The since inception Internal Rate of Return (IRR) as of June 30, 2010, was 11%, a slight decrease from the prior quarter. Buyout funds and Venture Capital recorded 11.4% and 8.7%, respectively.  Distressed Debt and Mezzanine funds posted an 11.2% return since inception and exceed the All Private Equity since inception return for the second consecutive quarter.

“We have now seen five consecutive quarters of positive returns for private equity with low volatility relative to the public equity markets” said Bill Pryor, senior vice president of State Street Investment Analytics, in the news release. “In the first half of 2010, deal flow picked up significantly and drove down accumulated outstanding commitments by about 10% from its peak in the fourth quarter of 2009.”

The index is based on the latest quarterly statistics from State Street Investment Analytics’ Private Edge Group and includes 1,859 private equity partnerships with a total fund size of $1.6 trillion.