Private equity strengthens in second quarter

Private equity returns for the second quarter ending June continue to strengthen, delivering a pooled internal rate of return (IRR) of 22.7% over a 10-year rolling period, up slightly from the first quarter’s 22.1%, according to the latest RisCura SAVCA South African Private Equity Performance Report.

Over five years, IRRs increased from 12% in March to 12.8% in June, showing continued medium-term improvement for the asset class. It showed the biggest improvement over the short term, with returns of 17.1% over a rolling three-year period, compared to last quarter’s 15.3%.

Measured in US dollars the IRRs for the asset class dipped again this quarter for the rolling 10-year period with returns of 21% compared to the previous quarter’s 22.6%. Over five years, returns slipped to 11% from 12% in March, which had previously seen a significant jump from 9.4% in December. The asset class posted a moderate improvement in US dollars over three years with returns of 11.9%, compared to 10% in the previous quarter.

“Our research has shown much increased deal-making activity in South Africa over the past two years. In the three years after the financial crisis hit, deal making was difficult as buyer and seller expectations were so far apart, but this has certainly improved since mid-2011,” says Rory Ord, head of RisCura Fundamentals.

Compared to the leading public indices, the sector held out against the FTSE/JSE All Share Total Return Index (ALSI TRI) and FTSE/JSE Shareholder Weighted Total Return Index (SWIX) over a 10-year period with returns of 21.7% versus 19.6% and 21.2% for the indices, respectively.

However, the asset class lagged the Financial and Industrial Total Return Index (FINDI TRI), over three, five and 10 years, which returned an impressive 28.9%, 20.4% and 23.9% for the respective periods, compared to 17.1%, 12.8% and 21.7% for private equity. Copyright. HedgeNews Africa – November 2013.

To view the full report click here.