South African private equity continued to deliver a “vibrant” performance and compared favourably with listed equity, the latest RisCura-Southern African Venture Capital and Private Equity Association (Savca) Private Equity Performance Report has shown.

According to the report, private equity showed an annualised internal rate of return of 21.2% for the ten-year period to March 2014, compared with the 19.6% yielded by the JSE’s all share index over the same period and the 20.5% tracked by the JSE shareholder weighted index.

Private equity had, however, trailed the JSE’s FINDI index, which had returned 23% over the ten-year period.

“These latest numbers confirm the returns-boosting role of private equity in a diversified institutional portfolio, and especially so in a global context where institutional investors are seeking sustainable avenues for shoring up performances.

“The performance is also one of the reasons why South African-based private equity funds have reported success in their recent fundraising programmes,” Savca CEO Erika van der Merwe said.

The Savca-KPMG 2014 Private Equity Industry Survey showed that South African funds had raised R27.3-billion in 2013, which helped to take funds under management in the industry to R162.2-billion.

“We are seeing a new wave of private equity funds being formed and expect more deal flow in the near future as capital is deployed by these funds. This is in the context of a market that has seen recovery since the 2008 financial crisis,” RisCura head of private equity Rory Ord said.

He stated that this recovery and resilience was evident in the fact that private equity returns were holding their ground against JSE-listed equity returns despite the listed market hitting record highs.

This resilience of private equity returns was in part owing to the long-term focus of the industry, and its strategic and active partnerships with the companies in which fund managers invest, Savca pointed out.

Moreover, South African private equity fund managers increasingly set their sights on benefitting from growth across the African continent, whether by way of cross-border deals that added to their portfolio of investments, or through providing their investee companies with the capital needed for operational expansion into new territories.

“Institutional investors in various markets now recognise the valuable exposure that private equity can give them [in terms of] African growth, in a way that ensures they have a positive, developmental impact in the region.

“For these institutional investors, whether pension funds, development finance institutions, sovereign wealth funds or family offices, this is an opportunity to do good while reaping financial benefits,” Van der Merwe said.