SA private equity performance steady against listed markets

Tanya van Lill, CEO of SAVCA.

• Outperforms ALSI TRI and SWIX TRI over 3 and 5-year periods

The latest Q4 2017 RisCura-SAVCA South African Private Equity Performance Report shows that private equity has outperformed the FTSE/JSE All Share Total Return Index (ALSI TRI) and the FTSE/JSE Shareholder Weighted Total Return Index (SWIX TRI) over the 3-year and 5-year reporting periods analysed. The quarterly report, which tracks the performance of a representative sample of South Africa’s private equity funds, also reveals that the public market equivalent (PME) recorded, is greater than 1 against all three listed benchmarks for the 3-year period; reflecting positively for the asset class.

Graph (below): CAGR

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

“The private equity sector, like many others, experienced a slowdown associated with the political uncertainty and populist narrative of most of the last quarter of 2017. The decrease in pooled IRR figures also reflects the cyclical nature of the asset class,” comments Tanya van Lill, SAVCA CEO. “We anticipate potential for an upward swing to be recorded in Q1, against the backdrop of renewed, positive political sentiment, a rise in investor confidence and the ability of SA fund managers to weather macro-economic storms though effective decision making and value extraction. This is coupled with government’s continued focus on positioning South Africa as an attractive and viable investment destination.”

USD IRR declined over the 10-year period, reaching 6.7%. The 5-year and 3-year IRR increased to 3.9% and 7.7%, respectively, up from 2.5% and 7.1% at September 2017.

“The report also noted an improvement in IRR from the 2013-2015 vintage funds,” says, Kelsey Tanner, Senior Private Equity Analyst at RisCura. “Smaller funds, particularly those under the R500m bracket, continue to outperform larger funds.”

Says van Lill, “Private equity has come a long way within the last 20-30 years; the asset class has become more widely known and appreciated by investors. Impact investment - addressing socio-economic issues, whilst making a solid return - has also gained traction within the sector, as well as the industry’s continued role in contributing to environmental, social and governance (ESG) measures.”

For full report click here.