Private equity returns are holding up, despite their second consecutive quarter in the red, with non-US funds faring better than their American counterparts.
According the State Street Private Equity Index, total returns from about 1,400 funds around the world were down 1.51 per cent in the June quarter, following a 0.87 per cent fall in the March quarter.
But the long-term internal rate of return (IRR) for non-US funds was 19.2 per cent at the end of June, against 13.6 per cent for US-only funds.
Gerard Labonte, head of State Street Private Edge Group analytics and administration service, said that while private company valuations might not necessarily exhibit the volatility of the public markets, the ability to finance deal flow and achieve exits had been severely constrained.
“Overall, private equity is feeling some of the same economic pressures as the public markets,” he said.
The past two quarters’ negative returns mark the first since the downturn in the US from October 2000 through to March 2003. That period resulted in a drawdown of 31.5 per cent which took seven quarters to reverse.
Labonte pointed out that this was not as bad a performance as the S&P 500 between September 2000 and September 2002, which fell 44.7 per cent and took four full years to reverse.
He also said that there were pockets of relative strength in private equity.
“Over the past year we saw launches of numerous distressed debt funds,” he said. “This segment has shown the ability to be opportunistic within a short time frame and actually achieved positive results for the quarter.”
