State Street Corporation 's GX Private Equity Index , which measures fund performance, made a “modest” rebound of 1.11 percent in the fourth quarter of 2015, after falling in the third quarter, according to a statement from the firm.
“Private equity funds posted a modest recovery in the fourth quarter after a brief drop in the previous quarter,” said Will Kinlaw, senior managing director and global head of State Street Associates, part of State Street Global Exchange .
Overall, Kinlaw said, “we have seen relatively steady performance in private equity investments for the past few years. The biggest driver in the fourth quarter rebound was the continued trend of impressive growth by venture capital funds, which haven't posted a negative return since 2012.”
The State Street index is based on directly sourced limited partnership data and represents more than $2 trillion in private equity investments, with more than 2,500 private equity partnerships, as of 31 March.
In 2015, private equity returns posted a 6.55 percent return in the US, compared to negative returns of both the S&P 500 and Russell 3000, noted Kinlaw.
Capital deployment remained steady in 2015, in comparison to 2013 and 2014, although in the first quarter of 2016, they dropped to their lowest level since early 2009. Private equity firms in the US posted a 0.42 percent return in the fourth quarter of 2015, an increase from -1.43 percent in the third quarter. For the one year return, US private equity funds recorded 6.55 percent.
European-focused private equity funds recorded a return of 1.94 percent in the fourth quarter. Private equity funds outside of the US and Europe, primarily emerging market funds, showed volatility with a quarterly performance of 3.63 percent in Q4, up from -3.13 in Q3, according to the statement.
In overall trends, according to three-year performance track records, venture capital funds have delivered outsized returns, while buyout and private debt funds showed signs of slowing down toward the end of 2015, Kinlaw added.
In addition, the plunging price in energy and commodities have continued to have a significant impact on the performance of private equity and specifically buyout funds in 2015, added Anthony Catino, managing director of State Street's alternative investment solutions business. “However, we have also seen signs that some private equity firms are looking for opportunities to pick up assets and entire companies, with the hope to take advantage of cheap valuation.”
State Street Corporation is a financial services provider for institutional investors, including investment servicing, management and research, as well as trading. The company has $27 trillion in assets under custody and administration, and $2 trillion in assets under management as of 31 March 2016, operating in 100 geographic markets worldwide, according to the statement.