State Street's Private Equity Index Finishes 2019 Strongly
The State Street Private Equity Index (SSPEI) posted its second highest quarterly return in the past two years at +4.35 percent in the fourth quarter of 2019, up from the +0.82 percent return in Q3 2019. Venture Capital funds rallied +5.68 percent after last quarter’s decline of -0.05 percent return, followed by +4.24 percent return from Buyout funds and +2.43 percent return from Private Debt funds.
The SSPEI is based on directly-sourced limited partnership data and represents more than $3 trillion in private equity investments, with more than 3,100 unique private equity partnerships, as of December 31, 2019.
“Private Equity performance rebounded in Q4 and scored a respectable +14.22% annualized return for 2019. The total capital raised in 2019 also surpassed the previous peak in 2007,” said Will Kinlaw, head of State Street Associates, a division of State Street Global Markets. “Certainly, the environment has changed considerably since the beginning of 2020 and it will take several months for us to better understand the impact of the global pandemic on private equity. The private equity cash flows that we are tracking up to March 2020 are showing clear signs of stress. The distribution rate in the first three months of 2020 is sitting at its lowest level in a decade.”
All three strategies saw an uptick in quarterly returns. Venture Capital recovered from a trough of -0.05% in Q3 and led the three strategies with a +5.68% return. Buyout funds recorded +4.24% in Q4, an increase from +1.13% in Q3. Private Debt funds returned +2.43% in Q4, up from +0.63% in Q3.
Q4 2019 saw a depreciation in the USD against the Euro of -2.9%. European-focused private equity funds recorded a quarterly gain of +8.13% in USD-denominated terms for Q4 2019 (+5.01% in EUR-denominated IRR). In USD-denominated terms, US-focused private equity funds experienced a +3.77% quarterly return in Q4, up from +0.87% in Q3; Funds focusing on the rest of the world returned +3.11%, up from +1.12% in Q3. Health Care funds led among sectors with a strong quarterly return at +8.13%, rebounding from -0.21% in Q3. They were followed by Information Technology funds which posted a +6.33% quarterly return, up from +1.14% in Q3. Energy funds remained in negative territory for the third straight quarter with -2.77% in Q4, up from -3.39% in Q3.
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