Private equity continues to strengthen over medium term

Private equity reported a drop in returns over a 10-year rolling period for the quarter ending in June 2014, according to the latest RisCura SAVCA South Africa Private Equity Performance Report. The pooled internal rate of return (IRR) over a rolling 10 years was 18.6%, down from 21.2% at the end of March. The 10-year return has reduced in recent quarters as the effect of the strong growth of the 2000 to 2005 period has diminished in weight.

Over a rolling five-year period, the asset class continued to strengthen with returns of 20.2%, compared to 19% at the end of March and 16.7% for the quarter ending in December 2013. Three-year rolling returns remain relatively flat, with an IRR of 13% for the quarter ending in June, compared to 13.9% in March and 13.7% for December 2013.

In US dollars, the asset class struggled for the quarter ending in June as the rand continues to fluctuate and ultimately weaken against leading global currencies. Over a 10-year rolling period, the asset class returned 14.9%, down from 18% in March and 19.6% in December 2013. Over three years, it delivered an IRR of -2.8%, compared to -1.1% in March and -1.5% in December 2013, reflecting the sharp weakening of the rand over this period.

Compared to leading public indices, the asset class hasn’t kept pace with the strong equity market returns of recent years. Over three years, it returned 13% compared to 20.8% for the FTSE/JSE All Share Total Return Index (ALSI TRI), 22% for the FTSE/JSE Shareholder Weighted Total Return Index (SWIX TRI), and 31.3% for the Financial and Industrial Total Return Index (FINDI TRI).  Returns over five years have been slightly stronger with pooled IRR of 20.2% for private equity, versus 21.4% for the ALSI TRI, 22.1% for the SWIX TRI, and 28.9% for the FINDI TRI.

Over 10 years, private equity has delivered an IRR of 18.6%, compared to 20.9% for the ALSI TRI, and 21.6% and 23.7% for the SWIX TRI and FINDI TRI, respectively. Copyright. HedgeNews Africa – November 2014.

To download the full report click here.