Private equity – investments off the stock market – is an alternative asset class worth exploring.
Returns in most cases are far higher than listed equities or unit trust funds.
Though in some cases there may be more risk, private equity lends welcome diversification to a balanced investment portfolio.
The private equity market in sub-Saharan Africa has been fairly quiet over the past two years, probably not surprising as investors everywhere have been cautious.
But next year could see “a robust increase in activity”, says Warren Watkins, head of private equity at KPMG in South Africa and the Africa region.
Currently, private equity funds have an estimated R33bn in undrawn commitments, which remain available for future investments.
The South African Venture Capital & Private Equity Association (Savca) says as an asset class private equity has a proven track record for strong performance.
“With its evolved business models focused on active value management the industry is in a position to take on new challenges,” said Savca CE JP Fourie.
“With the worst of the financial crises hopefully over, emerging markets present an attractive case for investment.”
Investing directly in private equity funds can be expensive. But there are some fund-of-fund structures available, as well as some companies listed on the JSE that specialise in private equity investments.
A recent example is Invenfin, which describes itself as a venture capital firm for seed and early stage developments.
Invenfin is a wholly-owned subsidiary of Remgro. It’s already made two investments – Ad Dynamo and ChessCube – and is looking at three others.
The investments are all very much in the internet and virtual gaming arena, a sector that might appeal to many investors.
An investment now would be diluted through having to invest in Remgro at the top.
But perhaps Remgro will consider a separate listing for Invenfin, as it has with some other subsidiaries.