African private equity activity has remained steady over the past seven years, with investors having confidence in the long-term growth and attractiveness of the continent. However, given the perceived risk premium that investors feel they should be receiving, I agree that returns have come under pressure. I would argue though that risk in Africa is perceived to be a lot higher than it actually is.

Despite the perception of risk and concerns around political stability and commodity price fluctuation, investor appetite for African private equity remains strong. According to the African Private Equity and Venture Capital Association, 76% of surveyed investors plan to increase or maintain their allocation to African private equity over the next three years. In addition, African private equity is positively aligned with another prevalent investor issue – environmental, social and governance (ESG) factors – due to its longer holding periods and greater control over investments.

In order to maximise returns, fund managers should adopt a more hands-on approach to managing investments. This requires time and human capital with the necessary skillset to engage more actively with and nurture portfolio companies. Sourcing quality, competitive deals, which require strong networks and an on-the-ground presence is also imperative in maximising returns.

Read the full article online, here: https://www.penews.com/articles/how-general-partners-are-combatting-falling-returns-20200320