Despite Dip, New Research Verifies Asset Owners’ Continued Interest in Private Equity Investments

State Street Corporation (NYSE:STT) today announced the results of its GX Private Equity IndexSM (PEI), a benchmark for comparative analysis of private equity performance, which includes a comprehensive data set dating back to 1980. In the third quarter of 2015, the index saw an overall return of -1.37 percent.

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“The third quarter marks an abrupt end to an uninterrupted, 12-quarter streak of positive returns, the longest winning streak in the 20-year history of our Index,” said Will Kinlaw, senior vice president of State Street Global Exchange. “With growing uncertainty about the global economy and a big spike in public capital market volatility over the past six months, it’s no surprise that the private equity market is taking a pause.”

The Index is based on directly sourced limited partnership data and represents more than $2.3 trillion in private equity investments, with 2,462 unique private equity partnerships, as of September 30, 2015.

“There has been a spike in exit activity over the past several years, with private equity managers returning capital to investors faster than they are calling it,” said Kinlaw. “This has been the trend for 16 quarters, and while it did not reverse in Q3, it has slowed sharply. Managers are being a lot more selective.”

Additional third quarter highlights include:

  • The Q3 number represents the biggest decline in the headline Index since Q3 2011. There have only been 10 quarters in its history where the index has posted larger declines, including: Q3 1998 at the time of the Russian debt default, Q4 2000 as the dot-com bubble imploded, Q3 2008 through Q1 2009 during the global financial crisis, and Q3 2011 when the Index dropped by 5.1% amid fears of a Eurozone crisis.
  • Total realized proceeds from exits declined in the second half of 2015, dropping by nearly 17.8% in Q3 and by a further 16.4% in Q4 2015.
  • All three major private equity strategies, Buyout, Venture Capital and Private Debt, posted negative quarterly returns in Q3: -1.63%, -0.51% and -1.27%, respectively.
  • Among sub-strategies within Buyout, Mega and Large Buyout recorded -1.94%, while Mid and Small Buyout only dropped by 0.11%.
  • Private equity funds outside of the US and Europe, primarily made up of emerging market funds, had a volatile quarter: performance dropped from 4.47% in Q2 to -3.13% in Q3 2015. European-focused private equity funds recorded a return of 0.29% in the third quarter, benefiting from a tailwind in the Euro to US Dollar exchange rate. Private equity funds in the US posted -1.43% and -1.25% quarterly return, respectively.

Soon-to-be-published research by State Street of more than 100 institutional investors globally finds that a majority expect their allocations to private equity to increase over the next five years. The complete research report will be released later this quarter.

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 $28 trillion in assets under custody and administration and $2 trillion* in assets under management as of December 31, 2015, 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 $22 billion as of December 31, 2015, for which State Street Global Markets, LLC, an affiliate of SSGA, serves as the distribution agent.

Index returns are unmanaged and do not reflect the deduction of any fees or expenses. Index returns reflect all items of income, gain and loss and the reinvestment of dividends and other income.

Past performance is not a guarantee of future results.

CORP-1784

State Street CorporationJulie Kane, +1-617-664-3001jekane@statestreet.com@StateStreet

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