Private equity returns sink deeper

Financial services provider State Street Corporation said private equity industry returns fell deeper into negative territory in the second quarter due to building global economic pressures.

The State Street Private Equity Index internal rate of return, based on quarterly statistics garnered from more than 1,400 private equity partnerships with a total value of US$1.3trn, fell to minus 1.51% in the three months to end-June, deepening from minus 0.87% in the previous quarter.

“Overall, private equity is feeling some of the same economic pressures as the public markets,” said Gerard J Labonte, vice-president of State Street Corporation.

“Private company valuations may not necessarily exhibit the volatility of the public markets, but the ability to finance deal flow and achieve exits has been severely constrained by the recent market shake-up,” he said.

Labonte added that the distressed fund segment, which is positioned to take advantage of the impact of the economic downturn, achieved positive results over the quarter.