Private equity ahead over three years

Private equity returns over three years, measured as annualised internal rates of return (IRR), have outperformed all listed indices in South Africa, delivering 14.7% to investors. This is according to the latest RisCura SAVCA South African Private Equity Performance Report.

The JSE All Share Index (ALSI) returned 6% in total returns for the same period. The JSE Share-Weighted Index (SWIX) gained 7.1%, while the JSE Financials and Industrials Index (FINDI) returned 9.8%.

Over five and 10 years, only the FINDI has outperformed the asset class, returning 18.5% and 14.3%, respectively. Over five years, private equity returned 13.4% compared to 12.5% for the ALSI and 13.3% for the SWIX. Over 10 years, it has gained 14.2% versus 9.8% for the ALSI and 10.6% for the SWIX.

Despite this, private equity returns across three, five and 10 years are down for the quarter ending in March compared to December’s figures due to drawdowns having increased over the past three years as funds deploy capital.

“Funds are now utilising more of the ‘dry powder’ remaining from fundraising rounds, which reached an overall high in 2015,” says Deborah O’Hanlon, junior associate, independent valuations, RisCura.

“As this capital has likely not yet made a meaningful contribution to the IRRs of funds considering the current economic climate, we see the inclusion of relatively lower fund net asset values in the first quarter resulting in lower unrealised returns.”

For the 10 years to the end of the first quarter, the asset class has posted IRRs of 14.2%, compared to 15.8% in the decade to end-in December and 17.7% in the decade to end of September. Longer-term returns over three years and five years have also come down slightly, affected by the rand-dollar exchange rate. Copyright. HedgeNews Africa – August 2017.

To read the full report, click here.