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