RisCura, the investment advisors specialising in emerging and frontier markets, along with the African Private Equity and Venture Capital Association (AVCA), and the South African Venture Capital and Private Equity Association (SAVCA) today announced the results of a global survey into investor attitudes towards private equity in Africa, which highlighted a significant move towards further investment in the continent amongst pension funds.
Rory Ord, Head of RisCura’s private equity valuation business, commented: “We worked closely with AVCA and SAVCA to establish the extent of increased interest in African private equity investments amongst various types of investors throughout the world. Pension funds, in particular, are under great pressure to achieve strong return figures to help funding levels, and the results of the survey clearly show that there is a strong belief that Africa could be the location for these returns.
“When asked about the attractiveness of Africa as an investment destination compared to other emerging markets, 70% of those surveyed rated the continent as either ‘more’ or ‘much more’ attractive. This is highlighted further by results that show pension funds expect their portfolio allocation to African private equity to rise from the average of 1% at present to 3% in two years’ time. In fact, results across the survey showed a similar encouraging trend. From a pension fund perspective, the most attractive sectors within Africa over the next three years were rated as energy and power/utilities by the funds. It is deeply encouraging that pension funds in developed market are starting to see the value in this frontier market and are embracing the fact that the solutions to their problems do not always lie close to home.”
Michelle Kathryn Essomé, Chief Executive at AVCA added: “The report confirmed that fund-of-fund vehicles were the favoured vehicle of pension funds to access private equity in Africa. This is expected as established fund of private equity funds provide the necessary know-how, track record and local networks that pension funds can readily tap into. The survey also highlighted that governance and social factors are seen as highly important by pension funds and other investors, and this is a prominent feature of private equity in Africa. Unlike developed market private equity, private equity in Africa is predominantly growth capital that helps to create jobs, support local communities and build sustainable local economies.
“That investor confidence is clearly growing globally shows how Africa is increasingly becoming an investment destination that can no longer be overlooked. We certainly believe that the development of private equity across the continent will facilitate further investor confidence and attract more capital to Africa in the immediate future – and that pension funds should consider how Africa can help to diversify and boost their returns. ”
Erika van der Merwe, Chief Executive Officer at SAVCA added, “Alongside the openness to first-time fund managers, the survey indicated a clear preference amongst investors for fund managers to be based locally in Africa, with 60% of respondents saying that African fund managers should be based in their most significant target market.”
The survey is available on request and was based on data collected from 48 limited partners from different regions of the world with collective assets of over US$150 billion in global private equity assets under management and undrawn commitments of US$50 billion.
View the interactive survey online here. For more information, please contact Rory Ord via email or on +27 (0) 21 673 6999, or contact Erika van der Merwe, CEO: SAVCA via email, or Michelle Kathryn Essomé, CEO: AVCA via email.