Private equity returns resilient

Private equity returns for the first quarter of 2016 showed the sector’s resilience with five-year and 10-year returns increasing from the previous quarter, despite a tough start to the year for public markets. This is according to the latest RisCura SAVCA South African Private Equity Performance Report.

Over a 10-year period, the asset class provided an internal rate of return (IRR) of 19%, up from 18.5% at the end of December. Five-year performance was also up marginally from 14.8% in December to 14.9% in March. Over the shorter term, the asset class returned an IRR of 14.6% in March, compared to 15.2% in December.

In US dollars, the asset class performed better than the previous quarter across all time periods. Over 10 years, it returned an IRR of 13.5%, up from 12.7% in December. Over five years, it was almost flat with a marginal negative 0.8% return, compared to a negative 1.5% in December. Over three years, it was down 4.7% in December, while for the first quarter of this year it was down 1.5%.

“The improvement in the rand’s value to the US dollar towards the end of March boosted returns as realisations during the quarter and unrealised returns were worth more in US dollars due to the rand’s strength,” says Deborah O’Hanlon, senior analyst at RisCura.

Compared to leading market indices in South Africa, private equity’s 19% IRR over 10 years outperformed the ALSI (13.1%), JSE Financials and Industrials Index (FINDI), which returned 17.6%, and the JSE Share-Weighted Index (SWIX), which returned 13.8%.

The asset class has also remained ahead of the ALSI over three and five years, returning 14.9% and 14.6%, respectively, versus a return for the ALSI of 13.6% (over five years) and 12.8% (over three years).

Meanwhile, the latest SAVCA 2016 Private Equity Survey shows assets under management grew by R15 billion in 2015, equating to an annual compound growth rate of 12% since 1999 (when the survey began). Fund raising proved robust with the asset class raising R29 billion in 2015, compared to R11.8 billion in 2014. It also added liquidity to the market, returning R8.9 billion to investors while allocating R10.5 billion to new investments in 2015. Copyright. HedgeNews Africa – August 2016.

To download the full RisCura SAVCA South African Private Equity Performance Report, click here.