committed capital. This figure should not be terribly surprising. It is a smidgen of the collective value of the JSE, and in that regard it’s worth remembering (in terms of potential private equity transaction flow), there are many more unlisted companies in SA than listed counters. Perhaps what is more surprising is RisCura’s estimate that private equity ventures in Africa collectively top $15 billion (more than R150 billion) in value. A recent study by Ernst & Young confirms a burgeoning, yet viable, private equity market has emerged in Africa. The study, which includes SA, argues: “Although the market is in its infancy, key themes are already developing, including more robust exit activity than many might expect.” Ernst & Young pointed out that despite a misperception that exits are hard to achieve in Africa, a 118 exits by private equity firms was achieved between 2007 and 2012. The performance has been exemplary. Ernst & Young gathered returns data on 62 exits, which shows that strategic and operational improvements generated returns almost double that of the JSE. It was also encouraging that private equity exits were relatively strong across all regions and not centred predominantly in the more developed SA market. In fact, Ernst & Young indicated that the more mature SA market witnessed relatively fewer deals sourced this way, while other regions saw relatively more. The overriding sense might well be that ordinary investors – without recourse to the
Although the market is in its infancy, key themes are already developing, including more robust exit activity than many might expect
There is, however, a way for ordinary investors to participate in private equity on the JSE. Under the JSE’s broader investment counters category, there are more than a handful of companies that are effectively dabbling extensively in private equity.
investors access to quality unlisted companies like fashion retailing conglomerate Pepkor and Premier Foods. Sabvest has a valuable holding in specialist industrial supplier SA Bias Industries as well as holdings in Set Point Group, Flowmax and Sunspray Foods; while RECM & Calibre recently took significant stakes in unlisted retailers Dischem and Safari & Outdoor as well as liquor group KWV.
A number of listed investment-styled counters hold interests in a portfolio of mainly unlisted investments. And although these investments may run longer than the traditional five to seven-year investment period, the form and function is similar to private equity.
Empowerment investment counters GPI and Sekunjalo have their respective value underpins in limited payout machine ventures like Grandslots, Kingdom Slots and Premier Fishing and a variety of cash-spinning technology ventures.
Investment giants like Remgro, Brimstone and Hosken Consolidated Investments (HCI) hold an array of unlisted investments. But the truth is that the bulk of their value lies in interests that are already listed on the JSE. To emulate the private equity experience counters like Brait, Sabvest, Grand Parade Investments, Sekunjalo, and RECM & Calibre offer entry points to some attractive unlisted businesses.
Some of these listed JSE private equity counters also trade at prices that offer a substantial discount to the fair value of the investments in the portfolio.
odd R10 million or R20 million – might be missing out on a sprightly investment genre.
Brait, which a few years ago adapted its traditional private equity model to encompass a long-term investment strategy, offers
Of course, not all listed private equity ventures have yielded sterling returns. In the nineties, there were a number of disappointing ventures like Vestacor, Cycad and Capestar. In this regard, it is critical for prospective investors to gauge the track record of the management team and the underlying investment style.
COMPOUND INTEREST IS CONSIDERED THE MOST POWERFUL FORCE IN THE UNIVERSE
YOU NEED TO HARNESS THIS FORCE TO BECOME A SUCCESSFUL INVESTOR.
The Lenape Indians sold Manhattan to the Dutch in
At Foord Asset Management we believe in
1626 for a bunch of beads estimated to have been
investing for the long term. Our track record over
worth 60 guilders at the time. At a 7% per annum
30 years is proof that managing investment risk
rate of return the current value would exceed €5.5
and compounding superior returns are key to the
trillion, allowing the Indians’ descendants to buy
creation of exceptional wealth.
Manhattan back and have trillions to spare.
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