Private Capital Indices

In recent years, private asset–linked structured products—such as collateralized fund obligations (CFOs)—have emerged as a potential solution to some of these challenges. By transforming portfolios of private assets into securities with differentiated risk-return profiles, CFOs can embed diversification, accelerate distributions to investors, reduce the initial capital required to access private markets, and help address certain regulatory constraints. In this quarterly insight, Professor Josh Lerner at Harvard Business School and The Private Capital Research Institute (“PCRI”) will highlight the key benefits and trade-offs that prospective investors should consider when evaluating these products.

The State Street® Private Capital Index (SSPCI) remained resilient in Q3 2025, although the composition of returns shifted across strategies. Venture Capital was the clear standout (6.78%), accelerating from the prior quarter’s strong showing and reinforcing its role as the cycle’s performance “torque”. In contrast, Buyout (2.00%) and Private Debt (2.45%) generated more moderate gains, pulling the All PE index down to 2.91% after Q2’s broad-based rebound.

Is AI a bubble? If so, what is my exposure? Many investors may be wondering this question, as interest in artificial intelligence (AI) and large language models (LLMs) has accelerated sharply over the past years. Using a relevant subsample of SSPCI technology-focused VC funds, we find that AI exposure is almost unavoidable: 93% of these funds have at least one AI-related investment in their portfolios.

The “Yale Model” of investing, pioneered in the late 1980s and 1990s at the Yale endowment, emphasizes the need for a heavy focus on equity in long-term portfolios, particularly illiquid private assets. The strategy generated sizable returns for many decades. However, with recent challenges such as increases to endowment tax rates and cutbacks to Federal spending, the viability of endowment model in the modern era comes into questions. In this quarter’s essay, drawing on data from State Street and insights gleaned from a recent roundtable discussion co-hosted by the Private Capital Project (“PCP”) at Harvard Business School and The Private Capital Research Institute (“PCRI”), Professor Josh Lerner takes us to consider whether current challenges to the endowment model are temporary or reflect a more fundamental shift, and whether viable alternative strategies exist.

The State Street® Private Capital Index (SSPCI) recorded a strong gain of 4.16% in Q2 2025, making its highest quarterly return since the 2021 peak. The acceleration was supported by broad-based strength across all strategies, led by Venture Capital at 5.25%, followed by Buyout at 4.05% and Private Debt at 3.03%. All three strategies improved from their Q1 performances of 1.96%, 1.52% and 1.53%, respectively.

Over the past two decades, subscription lines of credit (SLC) usage has increased substantially within private capital markets. This quarter presents our most comprehensive analysis to date. We reviewed the financial statements of over 2,400 SSPCI constituent funds spanning vintage years 2005 to 2025 leveraging Large-Language-Model (LLM), identifying the SLC utilization, observed the trends overtime, and quantified the performance impact of SLCs by two approaches - regression modelling and simulated cash flow analysis.

Persistent uncertainty and volatility have underscored market landscape for the past five years, and private market liquidity has tightened as a result. It is no surprise then, that concerns around the current exit market are at the forefront of GPs’ and LP’s minds alike. In this quarterly essay, Professor Josh Lerner from Harvard University takes readers on an exploration of the research on private market exits, highlighting the historical factors that underpin exit decisions and outcomes, and then turn to a discussion of the current trends, with the intent of gleaning insight into what market participants might expect over the near future.

The State Street® Private Capital Index (SSPCI) recorded a gain of 1.60% in Q1 2025, marking a modest rebound from the 1.09% return in Q4 2024. This mild quarterly acceleration was primarily driven by stronger performance in Buyout and Private Debt strategies, which returned 1.52% and 1.53%, respectively—up from 0.72% and 0.83% in the prior quarter. Venture Capital (VC) lost some momentum with a quarterly return of 1.96%, down from its 2.78% return last quarter, while it remained as the top performing strategy.

Over the past decade, private capital has lost some of its historical performance edge as US large-cap stocks – mainly led by large tech and AI-driven companies – have delivered unusually strong returns. At the same time, higher interest rates and slower exit activity made it harder for private capital managers to return capital and generate outsized gains. However, this quarter’s discussion shows that, once top performing “Magnificent 7” stocks are taken out from the index, private returns continue to outperform US large-cap stock at almost all horizons.