Tuesday, October 28, 2008

Private equity fared better than Nasdaq in Q2

By Mass High Tech Staff

As an investment, startups continued to outperform the stock market through the second quarter of 2008, according to published reports.

The one-year all-venture Private Equity Performance Index (PEPI) earned 5.1 percent over the year ending June 30, 2008 — besting the Nasdaq Stock Market and the S&P 500 but suffering an 8.2 percent drop below annual earnings ending with the first quarter of 2008. The report, issued by Thomson Reuters and the National Venture Capital Association, attributed the fall to the closing of the initial public offering window in the second quarter.

During the same one-year period, the Nasdaq Stock Market lost 11.1 percent, and the S&P 500 lost 13.8 percent.

During the third quarter, investments in New England-area VC-backed companies declined to $769.2 million from $998.9 million during the year-earlier quarter, down 23 percent compared with a national decline of 7 percent, according to Dow Jones VentureSource. The Dow Jones third-quarter numbers were reported Friday in a Mass High Tech article.

Over the past three years, the PEPI gained 8.5 percent, compared to 3.6 and 2.4 percent, respectively, for the Nasdaq and S&P 500. The five-year numbers showed 8.8-percent gains for the PEPI, compared to 7.0 percent for the Nasdaq and 5.5 percent for the S&P 500.

National Venture Capital Association president Mark Heesen acknowledged the numbers do not reflect the full impact of the capital markets crisis. PEPI five-year returns posted a 0.2-percent decline over the previous quarter. The 10-year numbers, which dropped 0.6 percent, likely face more downward pressure as the boom years of 1998 and 1999 fall out of the time window, Heesen said.