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State Street launches liquid private equity investable index

State Street Corporation has launched the State Street Liquid Private Equity Investable Index, a new solution that provides public access to private equity sector exposures.

The model is intended to be used as a liquid proxy for direct private equity investment and is the first in a series of investable indices.
 
The index was developed from research generated by State Street’s academic partnership, State Street Associates, which suggests that private equity managers collectively outperform the public equity markets in part by anticipating the relative performance of economic sectors. Based on this evidence, the model identifies private equity sector exposures utilising the proprietary State Street GX Private Equity Index (SSPEI), which consists of more than 2,400 private equity funds representing more than USD2.2 trillion in capital commitments. The SSPEI sources data from actual Limited Partner (LP) records, with historical global daily cash flow data back to 1980.
 
“While the Index can’t replicate the deal-specific alpha that a top private equity manger can deliver, it can provide a liquid, alternative to investors who can’t immediately deploy capital into true private equity investments,” says Will Kinlaw (pictured), senior managing director and head of State Street Associates. “This index demonstrates our ability to develop investment strategies that integrate the worlds of academic theory and financial markets practice – and to derive actionable information from data.”
 
For asset owners, the index provides a liquid means to increase or decrease effective private equity exposure and also provides interim exposure that can potentially reduce cash drag on performance while preserving liquidity to meet capital calls. For asset managers, the index provides access to a liquid return stream similar to private equity and satisfies private equity asset allocation requirements without the traditional impediments of illiquidity, lack of investment transparency, layered fee structures and large minimum investments.
 
The index is currently available for licensing in the United States and Australia, with subsequent launches to follow in the United Kingdom, Singapore, Switzerland and Canada.

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