Private Capital Indices

Recent private equity vintages—particularly the 2020 to 2022 cohorts—have delivered some of the weakest early returns in the past two decades, prompting LPs to reassess future commitment pacing. But do these trends reflect a structural shift in private equity performance, or are they part of a longer-term cycle? Drawing on State Street’s Private Capital Index data, Professor Josh Lerner of Harvard Business School explores whether vintage-level returns exhibit mean reversion similar to public markets, and what these dynamics imply for the current vintage environment and LP pacing discipline.

The State Street® Private Capital Index (SSPCI) experienced a stable return in Q4 2025. Venture Capital remained strong as the top performing strategy (6.67%), despite slowing down, while Buyout (2.02%) remained relatively stable relative to Q3 2025. Private Debt (1.49%) showed signs of decelerating performance. Overall all PCI is down to 2.86%, making Q4 the second lowest performing quarter in 2025.

As the use of LLMs continues to grow, new entrants have emerged in this rapidly evolving space. We surveyed the portfolios of Venture Capital funds in the SSPCI and identified eight relevant frontier model companies among their holdings. We then quantified the growth and concentration of investments in AI foundation model providers, finding that the space has grown tremendously in just three years and remains highly concentrated in two companies.

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.