For the layman
Retail investors have limited access to private equity. But the good news is that the Old Mutual Multi-manager Private Equity Fund 3, which was due to close to new business at the end of June, will remain open.
It is an aggressive fund with a target of inflation plus 10%. The minimum investment is R100 000 invested through a life policy. It is the only investment of its kind available and is open at the moment. More than a third of the money is invested into two Old Mutual private equity funds 2 (16% of total) and 4 (21%); the rest is with external managers such as Ethos Actis 3, Capitalworks 2 and the Carlyle Sub-Saharan African Fund.
Paul Boynton, head of Old Mutual Alternative Investments says it is a good mix of funds, as, for example, Actis invests across emerging markets and Carlyle across Africa. In addition, Capitalworks invests in small to mid-cap growth companies, and Ethos and Old Mutual both invest in larger companies, often together.
Boynton says investors can get their money out of the multimanager fund if they have to but only on a quarterly basis and can take out only the original investment amount. There is also a transaction charge of 7,5%. This might sound punitive but usually investors can’t get their money out until the fund’s term is over, which in the Old Mutual case is the end of 2023. Private equity funds are generally tied up for 8-10 years. Fees also add up, as the underlying managers have a charge of 2% with a performance fee of 20% once an underlying fund achieves a return of more than 10%/year. Old Mutual’s own fees are relatively modest at 0,34% for administration and 0,45% as a product management fee, though it isn’t clear what the difference is. There are also financial planner fees for the individuals who have used an adviser, These are fully negotiable but typically 0,75% to 1%.
Old Mutual Private Equity 4 does not have direct retail investors but it does not rely on the Old Mutual balance sheet for funding either. It is structured as a partnership with a range of limited partners, which are investors that invest in assets via a fund and not directly. The fund was officially launched in March 2014 and has commitments of R3,5bn. Boynton says it