State Street Announces Private Equity Index Results

Date: Monday, May 4, 2009
Author: SSIA

BOSTON – May 4, 2009 – State Street Corporation (NYSE:STT), the world’s leading provider of financial services to institutional investors, announced today the results of the State Street Private Equity Indexsm as of December 31, 2008. The index is based on the latest quarterly statistics from State Street Investment Analytics’ Private Edge® Group and includes more than 1,500 private equity partnerships with aggregate commitments of approximately $1.5 trillion.

 The Private Edge® Group provides detailed analyses of private equity investments for a diverse client base including public and private pensions, endowments and foundations, representing nearly 5,000 commitments totaling approximately $200 billion. The Private Edge® Group has one of the most extensive and comprehensive private equity data sets currently maintained in the marketplace, including partnership information down to the portfolio company level.

The following tables depict the quarter-over-quarter internal rates of return (IRR) of the index, the end-to-end IRRs for the index across 1-, 3-, 5- and 10-year horizons as of December 31, 2008, and the long-term internal rates of return (IRR) of the index by major private equity strategy, in addition to the composition of the index:

 

 

State Street Private Equity Index - all private equity

09-STT0279_PEI_LINEchart_Q4_2008

Note:  The downward trend accelerated in Q4 2008, reflecting the continued decline in global economies, credit conditions and public equity markets.

 

 

State Street Private Equity IndexSM - all private equity
      Trailing internal rates of return (IRR) as of December 31, 2008

09-STT0279_PEI_COLUMN-Q1_2009

Note:  At a time when interim private equity valuations are at extremely low levels, private equity returns for 3, 5 and 10 year time horizons remain positive.




       State Street Private Equity Indexsm

Composition and long-term IRR as of December 31, 2008

 

Strategy

Number of Funds

Commitments ($B)

Long-term IRR %

Buyout

701

1,058.2

10.1

Venture Capital

629

207.3

10.0

Other

192

187.1

5.3

Total

1.522

1,452.6

9.6

US only

1,238

1,102.5

9.7

International only

284

350.1

9.3

 

The Private Equity industry exhibited a quarterly return decline for the
fifth consecutive quarter in Q4 2008.  The return for the State Street
Private Equity Index was -16.32% for Q4 2008, which is a near 800 basis
point decline from the prior quarter.  Despite the recent declines, the
analysis of returns for Q4 2008 generated some positive results. 

“Private equity funds generally held their ground better than public
equities during the fourth quarter of 2008,” commented William Pryor,
senior vice president of State Street Investment Analytics.  In Q4 2008,
the S&P 500 reported a -21.94% quarterly return, while the Russell 3000
reported an even larger -22.78% decline.  The 500-600 basis point
outperformance of private equity versus public equity during the fourth
quarter is notable, given that in Q3 2008, the private equity return was
only 0-30 basis points higher than these two public equity indices.  On
an annualized basis, the State Street Private Equity Index reported a
one year return of -25.76%, outperforming the S&P 500 return of -38.49%
for 2008. 

While the fourth quarter returns were down across all major private
equity strategies, the Venture Capital funds in the State Street Private
Equity Index demonstrated resiliency to public market volatility and
declined by only -9.66%. 

“Venture Capital funds, by their nature, tend to be less affected by
difficult credit conditions than do Buyout, Distressed Debt and Credit
Opportunity funds,” added Pryor.  “In the fourth quarter of 2008, the
private equity funds that had the highest exposure to the credit
markets, either through highly leveraged portfolio companies or by
direct investment in debt securities, experienced the largest losses of
any private equity strategy as general partners wrestled with the impact
of the global credit crisis on their interim valuations.” 

Both domestic and international private equity returns declined in the
fourth quarter.  Domestic funds in the Index reported a -14.69% return
and International funds reported a -21.42% return in Q4 2008.  Overall,
the magnitude of the return changes between third and fourth quarters
for domestic funds and for international funds were relatively even,
indicative of the global nature of the challenges impacting the current
economic environment. 

State Street Corporation (NYSE: STT) is the world's leading provider of
financial services to institutional investors including investment
servicing, investment management and investment research and trading.
With $11.3 trillion in assets under custody and $1.4 trillion in assets
under management at March 31, 2009, State Street operates in 27
countries and more than 100 geographic markets worldwide. For more
information, visit State Street’s web site at www.statestreet.com
<http://www.statestreet.com/> .

 

About State Street Investment Analytics (SSIA)

State Street Investment Analytics (SSIA) provides performance and
analytics services through 14 offices globally and has more than 500
dedicated investment performance professionals.  Offering comprehensive
services in performance, compliance, risk and strategic analysis, State
Street Investment Analytics is well positioned to help customers monitor
and measure the success of their investment strategies in any market and
asset class including alternative investments, and currently provides
services for approximately 1,000 customers with asset volumes of more
than $5 trillion. For more information on our services, please visit
www.statestreet.com/analytics.