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SA Private Equity takes a knock but will rally

Africa Global Funds
Sept. 7, 2020, noon
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With the COVID-19 crisis hitting South Africa in March, the impact of the pandemic on the market and asset prices is evident in the first quarter performance for both public and private markets.

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With the COVID-19 crisis hitting South Africa in March, the impact of the pandemic on the market and asset prices is evident in the first quarter performance for both public and private markets.

This is according to the latest RisCura-SAVCA South African Private Equity Performance report which reveals that private equity, like many asset classes, couldn’t quite escape the impact of COVID-19.

Monwabisi Zikolo, Senior Private Equity Analyst at RisCura said that South African private equity is a resilient asset class.

“The results for the first quarter of the year are to be expected, but the second quarter results, we believe will reveal that resilience has remained intact, relative to the listed market.”

The 2020 first quarter report tracks a representative basket of private equity funds in South Africa.

According to the report, private equity’s performance relative to the listed market remains favourable, with outperformance across all three listed benchmarks over the five-year period.

Over the 10-year period, private equity outperformed the ALSI TRI and SWIX TRI and underperformed the FINDI TRI.

While over the three-year period, the private equity outperformed the SWIX TRI, underperformed the ALSI TRI, and performed the same as the FINDI TRI.

The direct alpha earned by private equity relative to the ALSI TRI, FINDI TRI and the SWIX TRI is 3.3%, 3.4% and 5.1%, respectively, over the five-year period.

At Q4 2019, these results were comparable at 2.9%, 3.8% and 3.9%, respectively.

The 10-year, five-year and three-year ZAR IRRs declined from 8.8%, 8.8% and 4.4% in Q4 2019 to 8.1%, 3.5% and -2.3% in Q1 2020, respectively.

The 2007-2008 vintage funds’ performance declined from 8.7% in Q4 2019 to 8.6% in Q1 2020.

The 2010-2012 vintage funds reported an IRR of -2.4% in Q1 2020, down from 3.2% in Q4 2019.

The 2013-2015 vintage funds reported an IRR of 7.8% in Q1 2020, down from 12.4% in Q4 2019.

USD IRR decreased across the three-year, five-year and 10-year periods, reaching -11.1%, -3.8% and -1%, respectively, down from 3.6%, 4.4% and 1.7% in Q4 2019.

Tanya van Lill, SAVCA CEO, said: “The reason for this large decline is due to the ZAR weakening by approximately 26.8% against the USD from December 2019 to March 2020.”

“Private equity remains a favourable long-term investment that has historically proven to navigate downturns and unfavourable economic cycles, and has a valuable role to play in the region’s economic recovery,” she added.

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