Private markets can often be reduced to the illiquidity premium: the additional return investors expect for locking up capital over a longer period. This is a familiar argument, but it understates the real source of value. It frames private markets as a reward for patience, when the real source of value lies in what skilled managers can do with long-term capital.

Trustees are not rewarded simply because their capital is illiquid. They are rewarded when a skilled manager can use that illiquidity to access businesses and assets the public market does not offer, then exercise enough influence to improve what those businesses and assets become.

For trustees and institutional investors, this distinction matters. A private markets allocation is ultimately a judgement on manager capability. Can the manager find high-quality opportunities before they become widely contested? Can it enter at the right price? Can it influence governance, growth, risk management and execution? Can it convert ownership into measurable outcomes?

In public markets, the investable universe is visible. A listed equity manager chooses from a defined pool of companies, each priced daily and analysed continuously by the market. The scope for informational advantage exists, but it is naturally constrained by transparency and competition.

Private markets work differently. South Africa has thousands of unlisted businesses, many of them high-quality and under the radar of the average investor. The edge lies in knowing which businesses exist and understanding which are ready for capital. In this context, deal sourcing becomes one of the clearest tests of a manager.

It begins with networks, reputation and team experience, which directly influences the ability to identify high-quality companies outside of the view of public markets.

Old Mutual Private Equity’s (“OMPE”) investment in In2food is a case in point. The business is a leading supplier of high-quality convenience food, supplying Woolworths locally and exporting to retailers such as Waitrose and Marks & Spencer. It is a South African industrial champion, yet it sits largely outside public view. That is precisely the kind of business private markets are built to find: established, growing, operationally strong and capable of scaling with the right partner.

Access gets capital into the right opportunity. Active management determines whether the opportunity can be improved.

Private equity gives investors a level of influence that public market ownership usually cannot. A manager can take a majority stake, sit on the board, align management incentives, support leadership and invest behind a clear growth plan. That ownership model changes the nature of the work. The manager is not waiting for the market to move but is actively helping the business grow.

At In2food, OMPE’s investment thesis rested on a real growth tailwind, increasing demand for prepared meals from consumers who are time-poor with access to cash. Old Mutual Private Equity supported more than R1 billion of investment into the business, including expanded production capacity, new facilities, new products and acquisitions. Over the investment period, earnings grew by 8% a year, and more than 6,500 jobs were created, with more than half of those jobs going to historically disadvantaged women.

The lesson is important for investors. Impact in private equity gains credibility when it follows business growth. A growing company can hire, train, develop suppliers, invest in better facilities and reduce its environmental footprint. A stagnant company has limited room to do the same. Growth creates the operating capacity through which impact becomes possible and measurable.

In2Food’s Banero facility captures this well. As one of the largest freshly prepared food factories in the world and a net-zero facility, it shows how private capital can support industrial expansion, job creation and climate-conscious operations within a commercial growth strategy. Sustainability becomes part of how the business competes, not an external layer applied as an afterthought.

The same access and control logic applies in infrastructure, although the mechanism differs. Renewable Energy Investments South Africa, known as REISA, shows how private capital can help build essential economic capacity. Located in the Northern Cape, the 75MW solar plant covers 210 hectares, has more than 343,000 solar modules and produces about 180,000 MWh of clean energy a year. That is enough to power roughly 75,000 medium-sized South African homes. It also reduces carbon emissions by about 125,000 tonnes annually, roughly equivalent to removing 27,000 cars from the road.

REISA’s importance lies partly in what it produces, but also in how it was delivered. Awarded in the first round of the Renewable Energy Independent Power Producer Procurement Programme in 2012, the project moved from construction in November 2012 to commercial operation in August 2014. For institutional investors, that execution record matters. It demonstrates the value of structured procurement, contractor discipline, governance and active ownership.

Infrastructure ownership requires more than providing capital. It involves managing construction risk, negotiating contracts, recruiting management, taking board seats, engaging communities and maintaining operational discipline over time. It also requires a clear view of the communities around the asset. Through initiatives such as the Kathu Community Trust, local lighting projects, early childhood development and enterprise development, REISA illustrates how infrastructure can create value beyond the asset boundary.

For trustees, the investment question is, what is the manager uniquely able to do with locked-up capital? If the answer is merely to hold it for longer, the case is weak. If the manager can access better opportunities, enter them with discipline and use ownership to improve performance, the investment case becomes more compelling.

South Africa needs capital that can build. Pension funds need returns that can endure. Private markets sit at the intersection of those two needs when they are managed with discipline, alignment and active ownership.

The premium, properly understood, is earned through the work of turning access into growth and control into value.