Private equity valuations continue to strengthen

Private equity returns over 10 years continue to strengthen, delivering a pooled internal rate of return (IRR) of 22.1% for the quarter ending in March, a significant jump from 20.6% at the end of December 2012, according to the latest SAVCA RisCura South African Private Equity Performance Report.

Over five years, IRRs increased from 11.4% in December to 12% in March, showing a marked medium-term improvement for the asset class. Over three years, returns dipped for the third consecutive quarter to 15.3% from 17.6% in December reflecting the disconnect in views between private equity buyers and sellers following the global financial crisis.

Measured in US dollars the IRRs for the asset class dipped slightly over 10 years, returning 22.6% compared to the previous quarter’s 22.8%. Over five years, returns jumped significantly from 9.4% in December to 12% in March, while the three-year rolling IRRs were lower at 10% in March compared to 15.2% in December, reflecting significant currency movements between the US dollar and rand at the opening and closing statement of funds’ net asset values.

Compared to the leading public indices, the sector beat the public markets over 10 and five years, returning 22.1% over 10 years compared to a return for the FTSE/JSE All Share Total Return Index (ALSI TRI) of 13.5%, and the Financial and Industrial Total Return Index (FINDI TRI) and FTSE/JSE Shareholder Weighted Total Return Index (SWIX) return of 17%.

Over three years, the asset class has struggled against the public markets with the FINDI returning an impressive 29.3% compared to 15.3% for private equity. The ALSI and SWIX also posted strong returns of 21.1% and 23.5%, respectively. Copyright. HedgeNews Africa – August 2013.

To view the full report click here.