African private equity funds outperformed US venture capital over last decade
A new index of institutional-quality private equity funds in Africa posted an 11.2% annualised return for the 10 years ending 30 September 2012.
This is the first quarterly report of a new African private equity and venture capital index, a collaboration between the African Venture Capital Association (AVCA) and Cambridge Associates.
The African Private Equity and Venture Capital Index comprises 40 institutional-quality private equity and venture capital funds based in Africa that invest third-party limited partner capital. The benchmark excludes captive funds, real estate funds and funds with open-ended structures. The total fund capitalisation is US$7.3 billion, and the vintage years covered are 1995 to 2012.
The data reveal that:
- African private equity funds outperformed US venture capital and are roughly in line with the broad Cambridge Associates emerging markets private equity and venture capital index for the most recent 10 year period.
- For earlier 10 year periods – for instance, those ending in 2008 to 2010 – African private equity outperformed the 10 year emerging market benchmark.
- Except for the most recent periods, African private equity has performed in line with or ahead of Asian and Latin American private equity.
- Over 40% of the funds in the African Private Equity and Venture Capital Index beat the broad emerging markets median fund for their vintage year.
- The strongest performing sectors within the private equity funds in the African index were IT/telecom, industrial, manufacturing and consumer. Other than the consumer sector, all of these have outperformed their other emerging market peers.
- African funds from the older, more mature vintage years (1996 to 1998 and 2002 to 2004) have outperformed African, emerging markets, and developed markets stocks on a public market equivalent (PME) basis.
- African funds from the 2005 to 2007 vintages are trailing African and emerging markets stocks to date, but are slightly ahead of developed markets stocks on a PME basis.
- Many of the funds in the African benchmark remain early in their lifecycle and are largely unrealised, making comparisons to public markets for more recent vintages less meaningful for now.
- A much smaller proportion of African funds are showing a partial or total loss than US venture capital over the vintage years 1995 to 2008.
The 40 funds include investments in more than 350 companies headquartered in more than 25 African countries, as well as a small number of Africa-focused companies headquartered outside the continent. Cambridge gathers data by tapping verifiable data sourced directly from each fund’s financial statements. Additional funds will continue to be added to the dataset over time.