News & Analysis

State Street: PE’s long-term IRR is 15%

A newly unveiled performance index from State Street, which draws on data from more than 1,300 funds, shows private equity’s long term net performance to date slightly above 15 percent.

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The long-term net IRR of the private equity asset class is 15 percent, according to the recently unveiled State Street Private Equity Index.

The most recent figures are included in State Street’s third-quarter 2007 update.

State Street Private Equity Index draws from the client data of investment services firm The Private Edge Group, including 1,381 funds representing $252 billion in commitments.

The data shows that the long-term performance of private equity globally as of September 30, 2007 is 15.03 percent. This is down slightly from 15.29 percent as of June 30.

For the third quarter, buyout funds averaged 15.07 percent IRRs, venture capital funds 12.42 percent and “other” funds averaged 14.13 percent.

According William Pryor, senior vice president of State Street, the “decrease in buyout transactions has manifested itself in slightly lower overall valuations and thereby lower long-term returns on a quarter-over-quarter basis across the US private equity space. However, international private equity actually displayed slightly improved returns over the prior quarter due to the continued weakness of the US dollar.