Estate Living Magazine #liveyourbestlife - Issue 46 December 2019 | Page 36

D E V E L O P
&
I N V E S T
PRIVATE
EQUITY
FUNDING
As private equity funding continues to enjoy favour among South
African investors, we take a look at the traditional structure, and
consider alternatives.
Private Equity investing has been a feature on the South African investment horizon
for some time now, and presents many opportunities for savvy investors and venture
capitalists alike. But it has its limitations and barriers to entry, the most notable being
long lock-in periods and a lack of investment transparency.
The sector continues to evolve, however, reflecting the agility of the industry
to respond pragmatically to shifts in investor demands fuelled by a change in
circumstances in the markets and industries in which such operations take place.
Private equity investing in South Africa
According to Trevor Lee, writing on MoneyWeb, changing global market
conditions over the last ten years, most notably lower interest rates and an equity
environment now conducive to the concept of private equity, have resulted in an
increase in private equity funding structures. Although this demand may dissipate
internationally following a bubble-type burst, conditions still bode well in the South
African context.
Higher than average real interest rates and a generally underperforming equity
market have set the scene for private equity funds to offer an attractive upside at
somewhat lower risk levels. Combine this with the predominant view that private
equity funding remains largely underrepresented in investment portfolios, and the
scope for private equity funding opportunities in South Africa becomes somewhat
more promising.