State Street: PE Returns Sink Deeper

LONDON (Reuters) – Financial services provider State Street Corporation said private equity industry returns fell deeper into negative territory in the second quarter due to building global economic pressures.

The State Street Private Equity Index internal rate of return, based on quarterly statistics garnered from more than 1,400 private equity partnerships with a total value of $1.3 trillion, fell to -1.51 percent in the three months to end June 2008, deepening from -0.87 percent the previous quarter.

“Overall, private equity is feeling some of the same economic pressures as the public markets,” said Gerard J. Labonte, vice president, State Street Corporation.

“Private company valuations may not necessarily exhibit the volatility of the public markets, but the ability to finance deal flow and achieve exits has been severely constrained by the recent market shakeup,” he said.

Labonte said the distressed fund segment, which is positioned to take advantage of the impact of the economic downturn, achieved positive results over the quarter. (Reporting by Simon Meads; Editing by Jon Loades-Carter)