The State Street Global Exchange Private Equity Index (GXPEI) closed the third quarter of 2017 with a solid performance of 3.85 per cent with Buyout Funds continuing to lead private equity strategies in gains.
The GXPEI is based on directly-sourced limited partnership data and represents more than USD2.7 trillion in private equity investments, with more than 2,800 unique private equity partnerships, as of September 30, 2017.
“Momentum is the name of the game in the third quarter of 2017,” says Will Kinlaw (pictured), senior managing director and global head of State Street Associates®, a division of State Street Global Exchange. “Not only were the overall returns close to the previous quarter’s strong returns, but the relative performances across market segments, such as fund strategy, region and sector focus was largely unchanged.”
Buyout funds posted a 4.11 per cent gain in Q3. While slightly lower than Q2’s 4.73 per cent, they still led the three main strategies for the seventh consecutive quarter.
Venture Capital return improved to 3.57 per cent from 1.84 per cent in Q2 and Private Debt funds inched lower to 2.84 per cent in Q3 from 3.08 per cent in Q2.
European-focused private equity funds experienced a 6.07 per cent quarterly gain in USD-denominated terms (2.32 per cent in EUR-denominated initial rate of return). US-focused funds returned 3.20 per cent, while funds focused on the rest of the world gained 4.29 per cent.
Among sectors, Industrial funds saw the highest return rising to 5.87 per cent, up from 4.73 per cent in Q2; followed by Information Technology funds with a return of 3.80 per cent, up from 3.10 per cent in Q2; Energy funds’ performance improved to 2.59 per cent this quarter up from 0.26 per cent in Q2.
Average monthly paid-in-capital to commitment (PICC) increased to 0.74 per cent in 2017 up from 0.64 per cent in 2016 while average monthly distribution to commitment (DCC) increased to 1.04 per cent in 2017 up from 0.88 per cent in 2016.
“Following a minor slowdown in cash flow activities in 2016, there has been a meaningful recovery in both capital calls and distributions signalled by the higher cash flow ratios in 2017,” says Anthony Catino, managing director, Alternative Investment Solutions for State Street. “The gap between distribution and contribution also widened in 2017 comparing to 2016, strengthening a trend started in 2012.”
