Cambridge Associates and the African Venture Capital Association (AVCA) have disclosed data indicating African private equity funds outperformed United States (US) venture capital, with IT and telecommunications strong performers.
The new index for African private equity indicates an 11.2 per cent annualised return for the past decade, which ended in September last year.
According to the collaborated data by Cambridge Associates and AVCA: “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.”
The index includes 40 funds with investments in more than 350 companies based in more than 25 African countries. There are also a small number of Africa-focussed companies based outside the continent.
Earlier 10 year periods, ending in 2008 to 2010, indicate African private equity also 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,” said AVCA in a statement.
“Over 40 per cent 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,” said AVCA.
AVCA added that all of the above have outperformed their other emerging market peers, except for the consumers sector.
“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 now,” said AVCA referring to data collected in the 90’s leading up to 2004.
The benchmark data reportedly excludes real estate funds, captive funds as well as funds with open-ended structures. According to the AVCA the total fund capitalisation is US$7.3billion from 1995 to 2012.
Eric Johnson, managing director at Cambridge Associates, said: “We are delighted to be working with AVCA to provide the first institutional-quality pan-African private equity performance benchmark.
“We believe it will go a long way to help limited partners assess and participate in private investment opportunities in Africa.”
