Absa Private Bank successfully moves into private equity

Absa Private Bank has been successful in creating a platform for a select number of high net worth clients to invest in all future private equity deals concluded by Absa Capital, the Groups Investment Bank.

The Absa Private Bank Private Equity Fund 1 was launched in May this year with a target amount of at least R200 million.

By the end of July, the amount invested by invited clients had exceeded the target - a month ahead of the planned end of August closing date.

Ian Henstock, who leads Absa Private Banks Wealth and Investment capability, attributes this positive response to their private bankers and wealth planners who rallied around the offering - having seen the relevance of it and reached out to their clients who qualified and who had shown an interest in the asset class.

"Our aim was to raise R200 million to capitalise the Fund. We have exceeded that target and were really delighted with the success achieved in adequately addressing the wealth management needs our clients.

"This is a unique offering in SA and an ambitious attempt by a domestic banking institution to break into the individual market.

"My mandate is not only to develop a wealth capability in Absa Private Bank, but also to make investment banking offerings available to select private investors. These offerings were previously available only to Absa's institutional and corporate clients", Henstock explains.

While Absa Private Bank manages the Fund, Absa Capital's Equity Investments Division acts as Investment Manager. In evaluating Absa Capital as Investment Manager, their successful track record in the field of private equity was considered.

Absa Capital was involved in four of the 10 largest deals in the local market during the past year, two of which were the biggest deals overall. These included Safripol (R1.3 billion) and Mvelaphanda Resources (R1.2 billion).

"By partnering with Absa Capital, we could offer a select number of investors a high level of diversification by allowing them access to Absa Capital's large and widely spread pipeline of deals. This significantly reduces the risk for our investors," says Henstock. 

Henstock emphasises that whilst numerous institutions manage hundreds of millions of rand on behalf of their clients, there are also individuals and families in South Africa who are worth considerably more than that in net wealth.

Also important, he says, is that private equity has very much been a talking point of late. Not only is it relevant, but its set to be a major asset class going forward, especially for wealthy individuals.

Private equity has been around for centuries, for as long as business has been conducted. It has created wealth for individuals who have grown their own businesses over many years. Weve turned it into an asset class for a wide but selective audience of high net worth individuals who want to invest in a range of businesses they do not operate themselves.

Henstock believes that private equity is capturing the imagination of the investing public. Private equity firms generally deliver outstanding returns. If you look at some of the private equity firms internationally, theyre making many people extremely wealthy and substantially add to the wealth of their owners.

Henstock says Absa Private Bank will establish additional private equity funds once the resources of the initial Fund have been fully invested.