Download 24 October 2016 Dear Investor For the third quarter of 2016 South

24 October 2016
Dear Investor
For the third quarter of 2016 South African local equities were flat to negative and industrial shares were
weighed down by rand hedge stocks which lost ground due to the ZAR strengthening by about R1 to the US
dollar in the quarter. Performance of the four Old Mutual private equity funds was varied due to the different
life stages of the funds as well as the holdings in each of the funds being very different. The Old Mutual MultiManager Private Equity Fund 2 (OMMMMPEF2) and the Old Mutual Private Equity Secondary Fund (OMPESF)
were again up for the quarter, by 4.5% and 0.9% respectively, due to continued improvement in operating
performance and further unlock of valuation discounts as some of their larger holdings near realisation.
Fund Returns as at 30 September 2016
FUND
Old Mutual Multi-Manager
Private Equity Fund 1
(OMMMPEF1)
Old Mutual Multi-Manager
Private Equity Fund 2
(OMMMPEF2)
Old Mutual Multi-Manager
Private Equity Fund 3
(OMMMPEF3)
Old Mutual Private Equity
Secondary Fund (OMPESF)
Q3 2016
1 year
3 years*
5 years*
Annualised
Return
since
inception*
-0.3%
-3.3%
13.2%
9.8%
20.3%
0.9%
7.6%
16.0%
15.9%
8.2%
-4.2%
-3.0%
3.0% **
N/A
3.7% **
4.5%
23.1%
8.3%
11.7%
10.6%
Longer-term Performance vs. FTSE/JSE All Share Index (ALSI)
Inception
Date
Since
inception*
ALSI
Performance
vs. ALSI
OMMMPEF1
1 May 2006
20.3%
12.2%
8.1%
OMMMPEF2
1 Oct 2007
8.2%
9.5%
-1.3%
OMPESF
1 Oct 2009
10.6%
13.1%
-2.5%
FUND
*UPF (untaxed) basis, annualised, net of fees
**IPF (Individual taxed) basis, net of fees
OMMMPEF1 was down 0.3% for the quarter and 3.3% down over the last year. Despite the recent
pullback, the fund is up 13.2% per year over the last three years and has been a superb creator of wealth
for investors by outperforming inflation by 14.1% per annum since inception in May 2006.
OMMMPEF1 has made four cash distribution to date. As investors have had the benefit of receiving cash
proceeds from the fund, we believe it more appropriate to calculate the since-inception returns for
OMMMPEF1 on an internal rate of return (IRR) or money-weighted basis (all other performance
calculations in this commentary are on a time-weighted basis). Those who invested in OMMMPEF1 at its
inception have received an impressive IRR of 26.6% a year to 30 September 2016.
OMMMPEF1 matures at the end of December 2016. All proceeds will be finally paid out in January 2017
based on the final price as at 31 December 2016. Clients will then be able to withdraw the funds or switch
them into other funds available on the Old Mutual Wealth platform.
OMMMPEF2 was up by 0.9% for the quarter. OMMMPEF2 has grown by 16% per annum over the last three
years and by 15.9% per annum over the past five years. After a challenging start impacted by the global
financial crisis, OMMMPEF2 continues to demonstrate the uptick in performance of a typical private
equity J-curve as the underlying funds near maturity. It has outperformed the ALSI over one, three and five
years and is now only 1.3% per annum behind the ALSI since inception. Further performance unlock is
possible as more assets are realised over the next 15 months before the fund matures.
OMMMPEF3 was down 4.2% for the quarter and has grown by 3.7% a year (after tax and fees) since its
inception in July 2013. The recent rand strength has affected returns negatively in the short-term due to
the fund’s offshore private equity exposure. However, the fund is only three years into its 10-year time
horizon.
OMPESF had another strong result, up 4.5% for the quarter and growing by 23.1% over the last year. The
strong performance over the last year has seen the five-year performance improve to 11.7% per annum.
Since inception in October 2009, the fund has grown by a solid 10.6% per annum. Given the
concentration of the fund across four holdings (Actom, Consol, Idwala and Tourvest), which make up
more than 99% of the holdings, performance can be volatile if one asset has a material movement in
profits or comparable multiples. The sale of these holdings as the underlying fund matures is expected to
shift the fund closer to its targeted return and will also result in cash distributions to investors.
Should you require more information on our funds please contact your financial advisor or Kevin French,
our business development executive, on 021 509 4326 or [email protected].
Best regards
Lance Grayson
Investment Principal: Old Mutual Private Equity
Contractual rights and obligations of investors in these funds are subject to contract. Private Equity investments have short-term to long-term liquidity
risks and there are no guarantees on the investment capital nor performance. The value of the investment may fluctuate as the value of the
underlying investments change. Past performance is not necessarily a guide to future investment performance.
Old Mutual Alternative Investments (Pty) Ltd (Reg No 2013/113833/07) (FSP 45255) is a licensed financial services provider, approved by the Registrar of
Financial Services Providers (www.fsb.co.za) to provide advisory and/or intermediary services in terms of the Financial Advisory and Intermediary
Services Act 37, 2002. Old Mutual Alternative Investments (Pty) Ltd is a wholly owned subsidiary of Old Mutual Investment Group Holdings (Pty) Limited
and is a member of the Old Mutual Investment Group.
Source of data: Old Mutual Alternative Investments, JSE
Old Mutual Alternative Investments (Pty) Limited is a Licensed Financial Services Provider. Signatory to the UN PRI.
This communication is subject to specific restrictions and disclaimers.
Details are contained at the following link:
http://www.oldmutualinvest.com/disclaimer