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SA Private Equity performance resilient against listed markets

05 March 2018 SAVCA

Outperforms ALSI TRI, FINDI TRI and SWIX TRI over 3-year period.

The latest Q3 2017 RisCura-SAVCA South African Private Equity Performance Report reveals that private equity’s performance relative to listed markets remains steady. The quarterly report, which tracks the performance of a representative sample of South Africa’s private equity funds, reveals that industry outperformed the FTSE/JSE All Share Total Return Index (ALSI TRI), the FTSE/JSE Financial and Industrial Index (FINDI TRI) and the FTSE/JSE Shareholder Weighted Total Return Index (SWIX TRI) over the 3-year reporting period. In terms of all periods analysed, private equity performed better than both the ALSI TRI and SWIX TRI.

The report also shows that the private equity industry delivered a 10-year (in Rand terms) internal rate of return (IRR) of 12.9% at September 2017.The 5-year and 3-year IRR remained relatively stable over the quarter at 13.6% and 13.7%, respectively.

Graph (below): Pooled IRR by time period (ZAR)

Graph (below): CAGR

USD IRR declined over the 10-year and 5-year time periods, reaching 7.6% and 2.5% at September 2017, respectively. Conversely, the 3-year IRR showed a large increase from 5.6% at June 2017 to 7.1% at September 2017.

“Despite a slight strengthening of listed market returns, private equity’s performance against these indices over the 3-year period continues to be solid. This can be observed by the positive Direct Alpha and a public market equivalent (PME) of greater than one,” comments Tanya van Lill, SAVCA CEO. “All achieved amidst turbulent market conditions as well as last year’s prevailing uncertain economic and political environment.”

Kelsey Tanner, Senior Private Equity Analyst, at RisCura acknowledges that while newer fund vintages continue to have the lower IRR compared to older fund vintages, the 2013-2015 vintage funds have seen a small increase in IRR and a small improvement in unrealised times money over the quarter. “The data shows that funds that have performed the best in terms of IRR, are characterised by older vintages and smaller fund sizes, particularly in the under R500m bracket.”

Says van Lill, “The future economic outlook, particularly when it comes to investor and business confidence, certainly looks positive (given recent political developments, including Zexit and the cabinet reshuffle); creating and enhancing industry growth prospects. No matter which way market dynamics shift, there is no doubt that private equity players will continue to be flexible and resilient as they prepare for 2018 - weathering ongoing storms, whilst still providing competitive investor returns.”

For full report click here.

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