The latest RisCura-SAVCA South African Private Equity Performance Report reveals that the country’s private equity industry has again outperformed listed equity over the medium-term, as of December 2019.
The 2019 fourth quarter report, which tracks a representative basket of private equity funds in South Africa, shows outperformance across all three listed benchmarks over the five-year period. Over the three-year and 10-year periods, private equity underperformed across all three listed benchmarks.
The direct alpha earned by private equity relative to the ALSI TRI, FINDI TRI and the SWIX TRI is 2.9%, 3.8% and 3.9%, respectively, over the five-year period. At Q3 2019, these results were comparable at 4.6%*, 3.4%* and 5.1%*, respectively.
SAVCA CEO, Tanya van Lill, says that South African private equity continues to deliver value for investors. “Results for the first and second quarters of 2020 will be telling, but we believe that private equity will remain resilient relative to the listed market.”
According to the report, the 10-year ZAR IRR remained flat at 8.8%* in Q4 2019 as compared to Q3 2019, and declined by 90 basis points as compared to Dec18 (9.7%*). The five-year ZAR IRR declined from 10.1%* in Q3 2019 and 10.5% in Q4 2018 to 8.8% in Q4 2019. The three-year IRR improved by 40 bps to 4.4% in Q4 2019 from 4%* in Q3 2019 and Q4 2018.
The 2007-2008 vintage funds have seen an improvement in their performance since last quarter, ending the quarter at an IRR of 8.7%, compared to 8.6%* in Q3 2019 and remained flat as compared to Q4 2018. The 2010-2012 vintage funds reported an IRR of 3.2%, down from 4.1% in Q3 2019 and 4.3% in Q4 2018. The 2013-2015 vintage funds improved from an IRR of 9.4%* in Q3 2019 and 9% in Q4 2018 to 12.4% in Q4 2019.
The USD IRR improved over the three-year, five-year and 10-year periods, reaching 3.6%, 4.4%, and 1.7%, respectively, up from 0.8%*, 3.7%*, and 1.3%*, respectively in Q3 2019. The USD IRRs across all periods improved due to the ZAR strengthening by approximately 7.7% against the USD from Sep19 to Dec19.
Monwabisi Zikolo, a senior private equity analyst at investment firm RisCura, says that despite significant headwinds, the prospects for private equity investments remain favourable.
*The Dec18 and Sep19 IRR’s have been restated due to a realisation that was double-counted.