Private equity continued its sideways movement over a 10-year period for the quarter ending December 2013, while medium-term figures show strong improvement, according to the latest RisCura SAVCA South African Private Equity Performance Report. Over a 10-year rolling period ending in December 2013, the asset class delivered a pooled internal rate of return (IRR) of 22.1%, almost unchanged from September’s 22.2%.
Meanwhile, over a five-year period IRRs increased for the third consecutive quarter, reaching 16.7% at the end of December, up from 13.4% the previous quarter. The asset class demonstrated more volatility over a three-year period with IRRs of 13.7% for December, compared to 16.9% in the previous quarter.
“IRRs for private equity over the longer-term more accurately reflect the asset class’s performance, while shorter-term numbers are more susceptible to currency fluctuations and large realisations and drawdowns during the period, as well as exchange rate at the time deals are concluded,” says Rory Ord, head of research for RisCura.
Measured in US dollars, the asset class returned 19.6% over 10 years, down slightly from 20.4% the previous quarter. Over a three-year period, IRRs dropped to -1.5% for the quarter from 5.8% in September reflecting the rand’s rapid depreciation against the US dollar in recent years.
Compared to leading public indices, private equity again lagged the Financial and Industrial Total Return Index (FINDI TRI) over 10, five and three years. Over 10 years, it beat the FTSE/JSE All Share Total Return Index (ALSI TRI) and FTSE/JSE Shareholder Weighted Total Return Index (SWIX) returning 22.1% versus 19.5% and 20.4%, respectively.
Over three- and five-year periods, the asset class lagged all indices, returning 16.7% over five years, compared with the ALSI’s 20.1%. Over three years, it returned 13.7% versus 16.3% for the ALSI, and a respective 17.6% and 28% for the SWIX and FINDI. Copyright. HedgeNews Africa – May 2014.
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