The effects of the global financial crisis continue to work through the short-term valuation numbers of South African private equity funds as figures dip for the second consecutive quarter. For the three years ending December 2012, the asset class delivered a pooled internal rate of return (IRR) of 17.6%, compared to 18.1% at the end of the previous quarter in September, according to the latest SAVCA RisCura South African Private Equity Performance Report. Over a rolling five-year period, in which figures are down for a third consecutive quarter, the asset class delivered an IRR of 11.4% compared to 12.6% for the previous quarter, and 12.9% at the end of June 2012.
Comparatively, over a rolling 10-year period, the asset class has experienced its second consecutive quarter of increased performance. This is reflective of increasing market confidence and price recovery following the divergence of expectation between buyers and sellers experienced after the global financial crisis, according to Rory Ord, head of RisCura Fundamentals.
For the quarter ending December 2012, the rolling 10-year IRR was 20.6%, a considerable jump from the previous quarter’s 17.4%, which was marginally up from 17.2% at the end of June.
Measured in US dollars, the IRRs for the asset class are 15.2% over a rolling three-year period and 9.4% and 22.8% over a five- and 10-year period, respectively. The difference in the IRR between the rand and US dollar returns is predominantly due to the difference in exchange rates between the start and end of the reporting period.
Compared to the leading public indices, the sector produced stable returns, outperforming the FTSE/JSE All Share Total Return Index (ALSI TRI) over all reported periods. Over three years it delivered 17.6% compared to the ALSI’s 14.9%, over five years it delivered 11.4% compared to 8.8% for the ALSI, and over 10 years it returned 20.6% versus the ALSI’s 18%.
The asset class marginally beat the performance of the FTSE/JSE Shareholder Weighted Total Return Index (SWIX), returning 20.6% over 10 years compared to 20.2% for the index. Over five years the asset class returned 11.4% compared to 10.7% for index. Over three years, the returns were broadly on par with the index returning 17.8% versus 17.6% for the asset class.
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