Private equity funds were down 1.37% in the third quarter of 2015, the asset class’ first losing quarter in three years, according to State Street’s GX Private Equity Index.
“With growing uncertainty about the global economy and a big spike in volatility, it’s no surprise that the private equity market is taking a pause.”The index, based directly on limited partnership data, represents more than $2.3 trillion in private equity investments and 2,462 unique private equity partnerships.
“The third quarter marks an abrupt end to an uninterrupted, 12-quarter streak of positive returns, the longest winning streak in the 20-year history of our index,” said Will Kinlaw, senior vice president of State Street Global Exchange.
The quarterly decline is the first since the second quarter of 2012, and the largest since the third quarter of 2011, when the index dropped by 5.1% due to “fears of a Eurozone crisis.”
“With growing uncertainty about the global economy and a big spike in public capital market volatility over the past six months, it’s no surprise that the private equity market is taking a pause,” Kinlaw said.
Buyout, venture capital, and private debt strategies all posted negative quarterly returns in Q3, losing 1.63%, 0.51%, and 1.27%, respectively. US private equity funds lost 1.43% in the third quarter, while European-focused funds performed the best, with gains of 0.29%.
Total realized proceeds from exits also declined in the second half of 2015, dropping by 17.8% in Q3 and an additional 16.4% in Q4.
“There has been a spike in exit activity over the past several years, with private equity managers returning capital to investors faster than they are calling it,” said Kinlaw. “This has been the trend for 16 quarters, and while it id not reverse in Q3, it has slowed sharply. Managers are being a lot more selective.”
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