New data suggests private market performance far exceeded public equities in Q1 2025.
In a quarter defined by President Donald Trump’s tariff uncertainty, the State Street Private Capital Index (SSPCI) recorded a 1.6 per cent gain, a modest rebound following a 1.09 per cent return in Q4 2024.
Head of product development at State Street Data Intelligence, Nan Zhang, attributed the acceleration to a stronger performance in buyout and private debt strategies, which returned 1.52 per cent and 1.53 per cent, respectively – up from 0.72 per cent and 0.83 per cent in the previous quarter.
“In contrast, Venture Capital (VC) lost some momentum with a quarterly return of 1.96 per cent, down from its 2.78 per cent return last quarter, while it remained as the top performing strategy,” he said.
This was in stark comparison to public equity markets, which floundered in the quarter as the S&P 500 declined by 4.27 per cent. However, Zhang acknowledged that it still posted an 8.25 per cent return over the past year.
Performing even worse were small-cap equities, represented by the Russell 2000, with a negative 9.48 per cent Q1 return and a negative 4.01 per cent decline over the year.
According to Zhang, this was largely due to the impact of President Trump’s tariffs implemented since February.
“As a result, private capital significantly outperformed public markets during Q1 – particularly small caps – and delivered comparable one-year and 10-year performance relative to large-cap equities,” Zhang said.
Private equity, previously considered a niche or high-risk asset, is now considered by many as a credible avenue for diversification and outperformance.
Claire Smith, head of business development, private markets at Schroders, suggested in June that private equity returns might surpass global equity returns in the latter half of the year and into 2026.
Private equity has historically outperformed global public markets by up to 8 per cent annually during times of market disruption and increased volatility, including the dotcom crash, the global financial crisis, and the COVID-19 pandemic.
“So it is clear that over the short term and the long term, private equity has been a strong performer compared to listed equities,” she said.
Looking more specifically at which private funds performed well, SSPCI found that on a one-year basis, most sector-focused funds consistently outshone their generalist counterparts.
State Street said this illustrates the increasing significance of sector specialisation in today’s competitive and capital-constrained market.
Performing particularly well were specialists in financials (11.90 per cent), industrials (10.60 per cent), energy (10.17 per cent), and information technology (7.33 per cent) – all of which exceeded the 7.01 per cent return generated by generalist funds.
Meanwhile, fundraising activity for the quarter totalled $78 billion, significantly below average. At this rate, the projected full-year total would be $312 billion, which is well under the $422 billion raised in 2024, also reflecting the impact of uncertain trade policies.
At the same time, capital committed but not yet invested declined by $83 billion to $945 billion.
State Street said the decrease signalled widespread challenges in fundraising and capital deployment for the quarter.
