Private equity index down for second consecutive quarter

Private equity funds generated an internal rate of return of -1.51% percent for the second quarter of 2008, according to the State Street Private Equity Index.

Private equity funds posted negative returns for the second consecutive quarter, according to data compiled by institutional investor adviser State Street.

The State Street Private Equity Index, which includes more than 1,400 private equity partnerships with a total fund size of $1.3 trillion, posted an internal rate of return of -1.5 percent for the second quarter of 2008, dropping from a -0.9 percent return for the first quarter.
Those quarters mark the first back-to-back losses the index has posted for investors since the downturn from October 2000 through March 2003, which resulted in an ultimate index drawdown of 31.5 percent and took seven quarters to reverse, according to State Street. However, private equity’s returns over that period still beat the performance of the S&P 500, which dropped 44.7 percent.

The index also revealed long-term internal rates of return by major private equity strategy, with buyouts leading all strategies at 14.9 percent IRR. Venture capital returned 13.1 percent, while those strategies the index defined as “other” returned 12.4 percent over the long-term.

International funds also beat out US-focused funds, returning 19.2 percent and 13.6 percent, respectively.