Private equity in South Africa remains an attractive asset class for pension funds and other institutional investors, Erika van der Merwe, CEO of the Southern African Venture Capital and Private Equity Association (SAVCA), has said.

“It compares favourably to listed equity markets, which is particularly encouraging at this time, given the strong run enjoyed by the JSE’s All Share Index in recent years,” she said.

The March 2015 RisCura-SAVCA South African Private Equity Performance Report shows that this asset class outperformed the JSE’s All Share Total Return Index, which delivered 18.1%, as well as the Shareholder Weighted Total Return Index, which delivered 19.1%.

The Financial and Industrial index marginally outperformed private equity, at 21.6%.

For the ten years to March 2015, the cumulative annual growth rate for South African private equity was 20.5%, net of all fees and expenses.

The March 2015 annualised 10-year return of 20.5% is up from the December 2014 10-year return of 19.1%, which in turn is an improvement on the September 2014 10-year return of 18.5%.

Commenting on how private equity funds are delivering this consistent performance, Rory Ord, principal at RisCura,said: “We see good returns in terms of the unrealised valuations of underlying investments, as well as in rewarding realisations and exits from portfolio companies.”

The survey, which tracks the performance of a representative basket of local private equity funds, also shows that over a 5-year period to March 2015, the annual performance of South African private equity was 17.0%, above the All Share of 16.1%.

Over a 3-year time period, private equity delivered a 15.0% annual return, with the All Share showing 19.4%.

Van der Merwe said that shorter return periods should be viewed with “caution and that longer-term returns are the most indicative of private equity performance”.

“This is because of the locked-in nature of fund structures, with fund life typically extending over ten years, as well as the typical investment cycle of private equity, which takes some time to realise returns,” she said.