The State Street Private Capital Index (SSPCI) recorded a gain of 4.16 per cent in Q2 2025, the highest quarterly return since Q4 2021.
According to the firm, this acceleration was driven by broad-based strength across strategies from venture capital (5.25 per cent), buyout (4.05 per cent), and private debt (3.03 per cent) – up from 3.29 per cent, 2.53 per cent, and 1.50 per cent, respectively, in Q1 2025.
Schroders’ Q4 private equity outlook similarly singled out opportunities in early-stage venture capital going forward, arguing that following the 2022–23 market correction, valuations have been reset, creating a fertile environment for early-stage start-up venture investments.
For instance, Schroders highlighted the resurgence of biotechnology, now presenting more appealing entry valuations after enduring several years of risk aversion.
Overall though, after a Q1 stumble which saw private markets outperform public equities over tariff worries, public equity markets still experienced a sharp rebound in the second quarter of this year.
“Consequently, private capital once again trailed US large-cap equities,” the report stated.
The S&P 500 saw a total return of 10.94 per cent for the quarter and an annual gain of 15.16 per cent. By comparison, small-cap stocks (Russell 2000), which have long lagged their large-cap counterparts, increased by 8.5 per cent over the quarter and 7.6 per cent year-over-year.
Focusing on the quarter’s results, Europe-focused funds achieved 8.35 per cent returns, outperforming US and rest-of-world funds, which returned modest gains of 3.55 per cent and 3.35 per cent, respectively. State Street attributed the region’s success to the depreciation of the US dollar against major currencies.
Meanwhile, private markets funds focused on financials and information technology saw stronger returns than the generalist strategy, with 5.31 per cent and 4.66 per cent, respectively.
This was also reflected on a one-year basis, where sector-specialists such as financials (14.17 per cent), information technology (11.57 per cent), energy (4.02 per cent), and industrials (11.36) all exceeded the 9.98 per cent return of generalist funds.
At the same time, the SSPCI found funds with a focus on industrials, energy, consumers and healthcare all underperformed in Q2.
Meanwhile, fundraising activity in the first half of 2025 totalled $157 billion, remaining considerably below average much like the low rates observed in Q1.
At the current rate, State Street said the total fundraising amount projected for the full year is $314 billion. This is a slight increase from the $312 billion projected after Q1, but still significantly less than the $435 billion raised last year.
According to State Street, fundraising figures were limited by competition from public markets and ongoing uncertainty surrounding trade and monetary policy.
At the same time, dry powder reached $1.09 trillion across the SSPCI universe, continuing a steady decrease from recent years.
As recently reported by InvestorDaily, historic lows in dry powder have seen a shift among savvy investors towards secondary options like continuation vehicles, also known as GP-leds, which offer increased liquidity.
Despite an ongoing reset in private equity, Schroders argued the asset class still provides diversification benefits, as well as new investment opportunities due to pricing dislocations and reduced competition.
