Private equity remains best bet for SA startups

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Private equity continues to outperform listed equity over a ten-year period in South Africa, in spite of long-term returns retreating from the positive trend enjoyed in recent quarters.

This is according to the latest RisCura-SAVCA South African Private Equity Performance Report, which tracks industry data up to September 2015.

It found the South African private equity industry delivered a ten-year internal rate of return (IRR) of 20.7 per cent in September 2015, down from 21.7 per cent in June 2015 but still higher than the 14.9 per cent return from the JSE All Share Total Return Index (ALSI) over the equivalent ten-year period.

The report said with investors searching for yield amid global market volatility and slowing economic growth, the performance of private equity in South Africa continues to highlight the benefits of including this asset class in a diversified institutional portfolio.

Erika van der Merwe, chief executive officer (CEO) of the Southern African Venture Capital and Private Equity Association (SAVCA), said the findings underscore the return-boosting role private equity can play.

“We expect this trend to continue in 2016 and, although the year is likely to be challenging for equity – listed or not – the hands-on, strategic and patient approach that is characteristic of private equity will likely support a steady performance by portfolio companies,” she said.

Rory Ord, executive at RisCura, said after five years of strong performance South Africa’s listed market is finally declining, showing a negative return in 2015.

“This year has started in similar form and, all in all, the ALSI is now roughly where it was two years ago. Considering this, South African private equity investors have certainly benefitted from their more diversified exposure over this period,” he said.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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