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Private Equity Funds Swing Back Into Positive Returns - State Street

Tom Burroughes Editor London 2 November 2009

Private Equity Funds Swing Back Into Positive Returns - State Street

Private equity funds, hit by the financial crisis, have shown signs of improved performance, according to an index of returns for this asset class as compiled by State Street, the US banking group.

After five consecutive quarters of losses, the State Street Private Equity Index rebounded in the second quarter of this year, posting a 5.48 per cent return, State Street said.

“All strategies and geographies were positive contributors during the quarter, with the biggest impact coming from buyout funds and US-domiciled funds,” said William Pryor, senior vice president of State Street Investment Analytics.

When compared to second-quarter returns in 2008, the index increased by 699 basis points, from -1.51 per cent. Since inception, internal rate of return as of the end of June 2009 was 9.08 per cent, a 69 basis points increase from the first quarter of this year.

Distressed debt and mezzanine funds posted a 16.02 per cent return for the second quarter of 2009, up more than 1400 basis points from the same quarter a year ago.  Buyout funds recorded a 4.74 per cent return for the period, an increase of 703 basis points relative to the year-ago quarter.

IRR is not strictly comparable with returns on listed equities, as IRR is designed to take account of the complex timing of private equity deals.

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