In the space of six months, U.S.-based private equity fund Capitalworks says it raised more than R2.7 billion ($270 million), predominantly from international investors with an appetite for African investment opportunities, according to a report at IndependentOnline.
It usually takes two -to -three years for private equity managers of its size to raise that amount of capital, the Cleveland, Ohio-based fund manager said.
This is the second such fund of its kind – the first raised R1.5 billion ($150 million) and has investments in Pronto Building Materials and a number of companies involved in mining. The fund has also invested in QCIL, a Ugandan company that produces antiretroviral drugs under licence from Cipla.
The second private equity fund, earmarked for South African investments, was over-subscribed. The company said this demonstrated strong international appetite for South African investment opportunities.
Capitalworks hopes to invest these funds in health care, education, financial services and fast-moving consumer goods.
The company, which now has third-party assets under management of more than R5 billion ($500 million), said more than two-thirds of the funds raised came from international investors, including global institutional investors, high-net-worth family funds and large charities.
It normally takes two-to-three years for private equity managers of its size to raise this amount of capital, said Chad Smart, co-founder and chairman of Capitalworks.
Investors believe that, in the medium to long term, South Africa still provides growth opportunities even though the short-term outlook is gloomy, the report said.
There’s a huge appetite globally for exposure to Africa, said Erika van der Merwe, CEO of the South African Venture Capital and Private Equity Association. Institutional investors such as pension funds are looking for private equity managers to invest in the opportunities offered by the continent, she said in the report.
The increasing appetite for private equity investing had also been supported by the need for portfolio managers to diversify their investments.
“The performance of private equity in the three-, five- and 10-year horizon has outperformed listed equity,” van der Merwe said. “So it is an attractive option for portfolio managers like institutional investors who are looking for long-term investments.”
According to the venture capital association’s 2013 private equity survey, South Africa’s private equity industry had R126.4 billion ($12.64 billion) in funds under management at the end of 2012. Of the funds raised in 2012, 56.2 percent was from South African sources.