The latest RisCura-SAVCA South African Private Equity Performance Report
confirms that the private equity asset class in this market continues to deliver a
sturdy performance. Data show that, over the ten years to the end of June 2014,
private equity funds yielded an annualised rate of return of 18.6%, net of fees.
Ten-year returns decreased slightly compared with those measured during
the previous quarter, as some of the firm gains made during the period of strong
economic growth of the early 2000s, when returns averaged 37.9%, begin to have less
significance. Private equity returns have underperformed JSE indices slightly over
this latest ten-year period, with the All-Share Index (ALSI) returning 20.9% and the
Shareholder Weighted Index (SWIX) returning 21.6% for the same period.
Five-year returns continue their trend of post-crisis recovery and, at 20.2%, are at
their highest since the third quarter of 2010. These returns marginally trail the
five-year ALSI (21.4%) and SWIX (21.1%) performance
“This strong and
consistent returns track record, alongside the continued financial market recovery
since 2008, supports a fresh wave of fund-raising by our local managers, many of whom
have launched new funds over the past year. We are seeing interest from both local and
international institutional investors, who are seeking diversification of their
portfolios across asset classes and by geographic region,” says Erika van der Merwe,
CEO of the Southern African Venture Capital and Private Equity Association (SAVCA).
Cash-flow trends into and out of private equity funds signify the
shifting focus for many fund managers in the South Africa industry, as a sizeable
number of funds mature and approach the end of their mandated life: Over the past year
distributions – the return of cash to investors – have outstripped drawdowns, the term
which refers to the transfer of committed capital from institutional investors to
private equity fund managers, and which happens towards the earlier portion of the
fund life.
Rory Ord, Head of Independent Valuation at RisCura,
“Private equity continues to offer strong performance and diversification benefits,
despite the current challenging economic conditions. New fund-raising activity has
been well supported by the number of exits that have recently occurred in the
industry, and returns continue to show a healthy trend post the financial crisis.”
Rohan Dyer, Head of Investor Relations at Ethos Private Equity comments
on prospects for the local industry, including the increasing expansion of mandates to
incorporate investments across the sub-Saharan African region: “A number of South
African private equity firms are well-positioned to take advantage of growth
opportunities across sub-Saharan Africa, both by buying assets in other countries and
by growing the interests of their South African-based portfolio companies north of the
border. Within South Africa, those firms with substantial value-add capabilities
should be able to achieve good returns by enhancing portfolio-company performance
despite the macroeconomic headwinds.”
The RisCura-SAVCA Private
Equity report tracks the performance of a representative basket of South African
private equity funds, and is published on a quarterly basis. A period of ten years is
considered the suitable benchmark for a comparison of returns, given that this is the
typical horizon for private equity funds.
NOTE: Private equity
returns are calculated as an internal rate of return (IRR) and are reported net of
fees. Returns for listed equity are calculated as a compound annual rate of return.
Ends
About SAVCA: The Southern African Venture Capital
and Private Equity Association (SAVCA) is the industry body and public policy advocate
for private equity and venture capital in Southern Africa, representing about R160
billion in assets under management. SAVCA promotes Southern African private equity by
engaging with regulators and legislators on a range of matters affecting the industry,
providing relevant and insightful research on aspects of the industry, offering
training on private equity and creating meaningful networking opportunities for
industry players.
www.savca.co.za
About RisCura: RisCura provides independent valuation, risk, and
performance analysis to investors in unlisted instruments in Africa. We partner with
clients to deliver the transparency and accountability demanded by investors and
auditors. Our clients include private equity funds, pension funds, credit funds,
banks, and other investors in Africa, and cover industries as diverse as agriculture,
retail, manufacturing, and the extractive industries. Our success is built on our
reputation for rigorous, research-based, and results-driven investment decisions that
benefit our clients.
www.riscura.com/what we do/fundamentals
For further information:
Tel:
+27 11 268 0041
Email:
research@savca.co.za
Solid returns for South African private equity